Capacity refers to the number of input resources available to produce relative output over a period of time. Capacity planning involves the ability of a production line or service department to meet specific demands over a period of time. It helps determine optimum utilization of resources and plays a vital role in the decision-making process. Strategic capacity planning allows organizations to meet their future requirements by ensuring production costs are maintained at the lowest possible minimum while maintaining quality. It also ensures that an organization can achieve its long-term growth plan and remain competitive.
Capacity planning aims at meeting the current and future resource requirement level at minimal wastage. The strategies involved are lead, lag, and match planning strategy. Some of the factors affecting capacity planning include a change that may not be accounted for, wishful thinking, diversified skill sets, low unemployment, which leads to hiring difficulties, lack of mentorship programs, and business agility that may result in resource allocation complexity. However, capacity planning can be beneficial for your organization; here’s how:
1. Lowers Resource Costs
Resource capacity planning allows you to identify the cheapest way to meet upcoming resource needs. It will enable you to see what each of your team members is working on and assess their strengths and weaknesses to make changes to upcoming projects and assignments depending on the member’s skills and availability.
With the capacity planning process, you can decide whether to delay a project to lower overall resource costs or do it immediately and incur more resource costs. For example, assume you have a project that John and Jane can ideally handle. However, John is among the most expensive resources, with several years of experience in your team and is available for the job. Jane is a recent graduate, but can only be available in a week. Looking at the two scenarios, you can make a decision that benefits your company cost-wise. Capacity planning helps you make informed resource management decisions for effective budgeting.
2. Ensures team Availability
Before taking on a new client, it’s essential to ensure you have an available team so you can deliver within the required timelines. Capacity planning helps you to determine the scope within which to take on new projects. Checking your resource reporting enables you to ensure that you won’t disappoint your clients or overstretch your team members. Letting your employees work beyond capacity causes burnout, leading to more sick leaves or stress.
3. Fast identification of Skill Shortages
Suppose you land a massive project that requires data analytics skills that you don’t have in-house. You can identify this issue with capacity planning before signing the job contract and avoid ruining your business reputation. Planning your work helps you the team’s availability and their skills thereof.
Since capacity planning helps you spot skills shortages on time, you can revise the project to utilize the skills you already have, recruit to add a temporary, or permanent skill set to the team or get your team trained to acquire the new skill. Managing resources with resource planning helps you forecast your skillset requirements and the kind of work you’ll do in the future so you can prepare your workforce to meet the demands and deliver what clients expect of you.
4. Enhances Management of your Skills Inventory
Skills inventory refers to a compilation of education, experiences, and skills within your current workforce. It helps you see the skills each of your employees possess in order to allocate them tasks that they can efficiently complete. For example, if you are an IT firm, team members should have technical skills like web design, programming languages, system security, system testing, and more. When your employees gain new skills, consider updating the skills inventory to ensure a balanced skillset.
5. Promotes Data-Based Decision-Making
When you feed everything into a resource planning tool, you can see how your team, projects, and budgets relate. This helps you make decisions based on relevant data. Capacity planning allows you to be in total control of your organization because, with all the factual data, you can make informed decisions regarding taking on new projects, hiring new employees, or pricing your work.
6. Enhances Intelligent Budgeting
Using capacity planning, you can create intelligent budgets since you have access to reliable data. It can help you avoid spending more time than required on a given project and eliminate the question of unexpectedly high invoices since you can back up your numbers. In addition, capacity planning enables you to justify budget increase negotiations or rate increments.
Understanding each employee’s labor cost for every project allows you to make more competent staffing and assignment decisions. This helps you assign tasks to the right employees while sticking to the client’s budget.
7. Enables booking of resources
Being able to book resources directly comes in handy in a matrix structure, where various operational and project teams rely on the same pool of employees. If an employee resource is booked, no one can book them a second time, enhancing efficient time management. Resource capacity planning also helps you highlight teams or individuals taking on too much work, flag conflicts, and identify gaps where people can be utilized better with additional tasks.
Instead of booking employees on an availability basis, consider being more strategic about utilizing your teams on certain projects. Don’t forget to factor in your organization’s projections so you can adequately prepare to deliver.
8. It prevents burnout and boredom
Capacity planning ensures that you have enough team members to complete your projects without overworking. It also allows you to confirm your team has enough to do, eliminating boredom. When you lay out all your projected project hours into a capacity planning tool and compare them to the time you expect from your employees, you can ensure that they don’t overwork, so you keep them happy. This helps deter constant new hires and team shifts and ensures you aren’t over-servicing. It’s important to note that understaffing may lead to team exhaustion and poor employee retention, while overstaffing may be costly.
Capacity planning gives you more confidence to run your business. The ability to forecast workloads, budgets, and team availability help you make informed decisions and also enables you to determine the appropriate time to take in more work without compromising quality and or increasing team burnout.