Demystifying Capacity Planning – Importance, Steps, and Benefits of Capacity Planning

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Capacity Planning

Before starting any project or production system design, what do you do? You make a plan considering what are the inputs needed, what’s the conversion process, and what’ll be the output. After taking into account the forecast and long-term planning, a business should go for capacity planning. But before that, let’s see what do we mean by capacity? Capacity is the ability of any business to achieve, produce, or store. In other words, it’s the ability of a system to produce output in a specific time period. Capacity planning and capacity management is vital to determine optimum resource utilization.It plays a key role in decision-making, for instance, change in the product lines, introducing new products, extension of existing operations, etc.

Defining Capacity Planning

Capacity Planning signifies the arrangement in which companies or businesses map their employees with the requirements of a particular project. Capacity is measured in how much work is carried out by employees and planning means scheduling work hours for a specified projector work.Consider an example of a start-up that has a team of 10 employees working for 20 hours a week.The firm will havethe weekly working capacity of 200, which means the companymanageup to200 hours in a week comfortably

Why is Capacity Planning Important?

How will be an agency's workflow entirely depends on how balancedis their demand and supply. You might be good in business development and add new projects to your portfolio.Butif you don’t enough resources to complete the tasks then you’ll end up overburdening your team members and the deliveries will also get delayed. However, it’s not as simple as it sounds. Typically, project managers calculate the billable utilization, plan resources and track employee’s productive hours, etc. But is that enough?

 importance of capacity planning

The best way is to strike a balance inthe profit margins and your team resources; and this is where capacity planning is important. Capacity planningpresentsa clear view of the amount of work a team can deliver without being over pressurizedand maintaining the quality. It’s not possible for most agencies to hire a dedicated personfor capacity planningor capacity management. This is where capacity planning softwarecome into play.

Concepts of Capacity Planning

Let’s now see the concepts of capacity involved in capacity planning:

  • Design Capacity

    The ideal situation, where the maximumoutput possiblecan be produced in a specified period of time.
  • Effective Capacity

    Less than the design capacity, this one is a more realistic view. It meansthe maximum outputpossible with assumedamendments in product mix, planning and management problems, resource challenges, etc.
  • Actual Output

    The rate of output achieved in reality. Actual output cannot go beyond effective capacity because of issues like machine breakdowns, employee absenteeism, unusual delay in supply of material, equipment, or any unforeseen challenges like power breakdown, etc.

The Three Types of Capacity Planning

If you have planned well in terms of all three types of capacity planning, thenyou can rest assuredthat you would have enoughof three key resources in the long- and short-term.

  1. Product capacity planning

    It ensures the availability of enough products or resourcesyou need to deliver your projects or task properly.
  2. Workforce capacity planning

    It ensures the availability of enough people and work hours to complete certain tasks or job. Workforce or team capacity planning helps you to raise a flag on when and how soon you should hire more employees so that your deliverables are not affected.
  3. Tool capacity planning

    It ensures that you have all the tools needed to complete a task. This includes any hardware, software, or machinery you would requirefor delivering your product.

Three Strategies for ExpandingCapacity

The main three strategies that any business can use for expanding their capacity of capacity planning are as follows:

plan of capacity management
  1. Lead Strategy

    One of the most aggressive strategies, where the businessforesees an increase in demand and accordingly increases its production capacity much in advance. This strategy is used to attract customers towards a company’s products and drive them away from products of competitors, mainly because of inventory shortage in high demand periods. This waystockout costs are also minimized.
  2. Lag Strategy

    In this case, the organization responds to the high demand by increasing its production capacity after the businessis running at full power.However, a business does not boost its production just on assumptions. Rather, it seeks proper facts and figures, and only then does it begin to act on it.The advantages of thisstrategy are that the businesswould not carry any additional inventory.Hence, there is a least risk of overproduction, and large investments also can be put off till essential.
  3. Match Strategy

    A moderate strategy which is an amalgamation of both Lead and Lag strategies. Here, a business does not start building on anticipating a very high demand, nor does it not act at all until the high demand phase knocks at your door.In this strategy, a business makes small modifications depending on the changing market conditions. This is tough to implement, but the risk is quite less comparatively.

Besides these three strategies for expanding capacity or capacity planning, many organizations follow adjustment and dynamic strategies too. In Adjustment Strategy, they either reduce or addto the capacity in small amounts as per the prevalent consumer demand. However, Dynamic Strategy is a lot more secure and forecast-driven as here, a business adds capacitybased on actual demand and sales forecast figures, a little before it is required.

The Benefits of Capacity Planning

If you want to developyour project plansand resource schedules more accurately, then capacity planning and capacity management are imperative. The key benefit ofcapacity planning is that it ensures you have resources or team members who have the right skills as required.As a project manager, you should keep your team occupied and fully utilized (but not over-utilized), and that’s where team capacity planning and tracking employee capacityhelps. It also helps inenhancing project efficiency for an agency and simplifying the process of planning for future. So, consider using a capacity planning tool to gain the following benefits:

Benefits of Capacity Planning
  1. Knowthe Capacity

    Imagineif you knew the time it would take your team to perform a certain task. Wouldn’t that make your life so easy? Especially for service industry, it is very beneficial to know how many tasks or projects each team member can take on to deliver the project on time.If more than one resource takes care of multiple responsibilities for the same client, consider the type of job or task each person is performing, and how long does it take to do it.
  2. Cutting theResource Costs

    Capacity planning helps an organization to successfully meet the future resource requirements effectively. It enables you to see the utilization, time and effort used for each team member to do a task, and then you can make necessary changes to the future projects based on the skill-set and availability of your team members.It also aids a business to make the right choices about resource management so that you can reduce your overall resource costs.
  3. Get Real-Time Data

    You might know that one of your mainemployeeis not going to be available.But that won’t help you complete your project or goals in terms of resource planning . Make surethat you have real-time data to work from, for example, schedules, vacation plans, and utilization of all team members, and also ensure that everyone is committed to using one system in a uniform way. Remember, any tool is only accurate or effective as the data going into it.
  4. Consider Employee Skills

    It’s a fact that one person could be better at some tasks than others. Ensure your project manager or team leadis able to identify those skillsand pick the right people accordinglyfor a project. So, if it’s a graphic-intensive project, first focus on getting good graphic designers who are trained and experienced. In a content-heavy project, focus on getting good quality instructional designers or experienced writers and editors.
  5. Ensure Availability

    Before signing the dotted line for that coveted contract, think if you are really sure that you can pull this project off? Doing capacity planningwill highlight what scope you should define for your new projects. Then, you should be sure that your team membersare available, or can you get in extra resources for the project?Also, tracking employee capacitywill ensure that you won’t overburden your team.
  6. Plan Better

    Be awareof the demand and then plan for it. Incorporateholidays, internal projects and initiatives, any events, or new projects coming up. As a project manager, being able to plan more efficiently means accurate and streamlined forecasting for all your team resources and projects. This, in turn, leads to greater probability and better reviews from your clients.
  7. Manage Your Skills Inventory

    Capacity planningalso has a strong association to your team’s skills inventory.Maintaining a skills inventory is very beneficial as this record of which team members can do which task, or what skills they possess is quite helpful in planning for a project. For an IT project, you should list down the expertise of your team members to see who is adept at: web designing, technical programming, IT architecture, or developing system security and managing system testing. This will help you to quickly allocate tasks to suitable people. You can use this inventory to also check which skills are suitable to deliver your strategic initiatives, then you can take steps accordingly.
  8. Maximize Utilization

    Most businesses face a challenge with team capacity planning or tracking employee capacity or resource availability. If you get a clear view of which team members are available and when, you can easily maximize the team utilization by planning accordingly. By maximizing the utilization, it is possible to get more work done and accomplished with the same resources. This, as a result, enhances your chances for on-time deliveries and project success.
  9. Production cycles

    Capacity managementhelps an organization to maintain the required production cycle so that it doesn’tlag behind in periods of high demands. So, if you have a business of certain products that have a seasonal demand, usecapacity planning to functionas per the expected demands.Capacity planningtoolsalso help your in gauging the downward trend so that you can stop the manufacturing process.
  10. Calculate Accurate Workload

    It’s important to ascertain the kind of workload your team or resources can manage. After evaluating each person’s skills, and strengths and weaknesses, calculatethe time it would take for your team to handle each task. One thing that should be avoided in the long run is multiple unplanned projects which can lead your team to burn out. Dig deeperin your long-term projects, see how many are new clients, or new products, and how many are existing ones. Then, check your team’s ability to manage these projects.Finally, estimate what resources would youneed to devote to the tasks. If this sounds tricky, rely on capacity planning softwareor tools that can assist you with perfect calculations.
  11. Organize Your Time

    Your team memberswould bemore productive and happier when they are aware of what they should be working on and when. Make a plan for each task and how much time will that take. A project manager should know what each team member has on their to-do list and accordingly prioritize their workload. If they wait for an instruction for you each time, there will be a lot of time and effort wasted.

Steps in the Capacity Planning Process

If your agency wants to leverage the benefits of capacity planning, then, you must firstcreate a process. This process has the following four steps:

Step 1: Identify all existing and new projects and tasks

The first stepis to know whatis it that you're going to plan for.It’s important to make a detailed outline of allthe tasksthat need to be done, while taking a long-term view. Check your pipeline and what all projects are there in the coming 3-6 months. Then, start to calculate how much effort and time each project will take by breaking them down into smaller tasks or milestones.It’s also vital that you share this outline with your team as they will be the ones actually doing the work, and hence,they can verify if theplan is accurate and possible or not. Also,remember the scope of each project to calculate the number of resources needed to complete each task.

Step 2: Decide a strategy

Which strategy will you pick - lead, lag, or match?Determine which strategy will work the best for your agency and will fit into the decided budget. Note that though a lag strategy is not that risky, a match strategy will enable you to use capacity planning to your gain.The strategy you opt for will determine your approach towards capacity planning, and if you have bandwidth to take upadditional projects and resources without going into any risk.

Step 3: Create a realistic resource schedule

The next step is to create a realistic working schedule based on the outline you made in step 1.As capacity planning is related to your team's skillsets and availability, the resource schedule mustconsider other aspects such asthe project type, tasks, budget, and hours or effortrequired. Let’s take an example. Suppose you have 10 programmers who can dedicate 50% of their time to a new prestigious project in the next couple of months. Use that availability to estimate how many full-time programmers can work on this project as 10 programmers working at 50% capacity = 5 full-time programmers available. So, 5 full-time programmers putting in 40 hours of effort every week for 2 months leaves you with 1600 hours that you canutilize on the project.

Step 4: Track down minute details

Capacity planning is a continuous process where an agency monitors how their projects are progressing to ensure capacity is not exceeding the ideal utilization rate. Without the right capacity planning software,this task will become very easy.Using capacity planning tools helps you to automatically track your capacity planning efforts. UsingEnbraun’seResource Scheduler will enable you to calculate your team's capacity, effort, utilization, etc automatically. You can therefore ensure that you're not over-allocating any tasks to any member. The public holidays, personal vacations, and other events will be baked in automaticallywhich makes it easy to find if you need to add any extra resources.

Capacity Management with eResource Scheduler

eResource Scheduler (eRS) is a leading multi-user and collaborative scheduling, capacity planningand management software. This tool is specially designed to enable organizations to schedule their resources on variousprojectefficiently. That’s not all. The client-server architecture of this capacity planning tool permits multiple users to work together and share data in real-time. It’s a simple process to configure eResouurce Scheduler if you need to schedule employees or custom-defined resources like meeting rooms, equipment, or vehicles.This best-in-class employee scheduler also helps in maximizing your utilization and productivity at all levels of the organization. There’s nothing technical about understanding it and it’s a very simple to use toolwhich makes it very popular among organizations of various sizes and industries.

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