Nowadays, the business sector is facing a highly competitive and volatile market demand worldwide. One of the most important factors in an organisation’s balance sheet and perhaps the most expensive one is resource cost. In short, a modern business should plan its strategy in such a way that scarce resources are utilized in the most efficient way possible.
Many organizations lack a proper resource capacity planning software. Most of them are still making use of their legacy systems, homegrown applications such as excel spreadsheets. There are numerous resources but the absence of a productive linkage to boost their utilization renders resources incapable of providing benefit to the enterprise.
This comprehensive guideline will help you to know your enterprise resource demand and capacity planning to design the process with the right management tool.
Before we dig in deeper into the article. It is important to know what exactly is resource capacity planning?
What do we mean by resource capacity planning?
Resource capacity planning is prognosticating the gap between the capacity and the demand for resources. This offers an action plan to overcome this gap. The definition of resources may vary from an enterprise to enterprise such as people, vehicles, facilities, assets, equipment, etc.
Resource capacity planning demands centralizing data from different systems. These systems are skills, human resources, current projects, resource allocation, future pipeline projects, non-project activities and vacations. It aids you in building a single real time system as a single source of truth. It also facilitates real-time forecasting of resource demand vs capacity. It could also come in handy in making you aware about possible future resource shortages/excess, project vacancies, challenges, utilization, margins and revenue. This way you can take precautionary measures to minimize your loss.
Measuring resource capacity
Accurate measuring of resource capacity and demand across the resource pool is a vital part of the staff capacity planning.
By resource capacity, we mean the total number of standard hours a person can work as per the employer’s requirement.
The following factors are important to consider while measuring resource capacity;
- Permanent employees and contractors
- Number of full-time and part-time employees
- When employees were hired and joined the work
- Employees leaving the business on a specific date
Measuring resource demand
Calculating resource demand involved understanding the number of resources required. The work can be related to projects, admin, support, BAU. The amount of work is measured in terms of person days, hours, FTE, etc.
Calculating capacity vs demand
Capacity vs demand is predicting shortages or excesses of resources in a short or long term agreement. It is performed by scrutinizing the gaps between resources, capacity against the demand for resources. This can be calculated in relation to working hours, FTE or person days.
It is a shortage of resources that occurs when the demand is usually higher than the supply. Similarly, it is the excess of resources when the demand is lower than the capacity or supply of resources.
Now that you have got the basic gist of resource and capacity planning, you should also make yourself aware of the benefits of resource capacity planning.
Advantages of resource capacity planning
● Reduce project resourcing cost
With the help of smart capacity planning strategies, overall resourcing cost can be reduced drastically;
- Delete over/under skilled resources on projects
- Maximize the use of cost effective global resources while maintaining quality
- Proper capacity planning can save you from last minute hiring cost
- Manage and control unplanned attrition
- Prevent double booking of resources and minimize burn rate
● Improve efficient consumption of the workforce
The capacity planning system foretells billable and strategic utilization of the workforce beforehand. This in turn will help you to arrange employees from non-billable or less important work to billable and more important work. Billable utilization is critical for your professional approach towards business for optimum profitability and sustainability.
● Deploy expert employee at the right time and right cost
Having a brilliant employee with the right set of skills is crucial for the completion of a project within your estimated budget and time.
Your resource planning and allocation system must be organized enough to identify competent labour to allocate competent resources. This mainly depends upon their skills, qualifications, experience, location teamwork, resource cost rate, etc.
● Predict skill shortage and bridge the gap smartly
Capacity planning can assist you in identifying early skill shortage so that you are prepared to take inventive measures on the spot.
- Adjust project timelines accordingly
- Retrain and urge employees to add more skill ahead of time
- Hire contingent workforce ahead of time
- Maximize bench management
3 best practices of resource capacity planning
Resource capacity planning is becoming increasingly popular and critical for every business to manage resourcing costs and boost up profits. As a result, the theory of capacity management is not just limited to the basics of measuring demand against capacity anymore.
Some of the best practices in the area are;
1. Keeping a check on competency matrix across enterprise
It is extremely important to keep a track of data information about the competency and workforce. It eases the flow of right resources and skill, to experience, individual preferences and qualifications to be allocated to the paperwork. It helps to introduce a new project that may be in need of a niche skill that is hard to get from the market.
2. Manage resource capacity vs demand by timeline
Another name for money is time in the business world. A business must forecast capacity vs demand from various dimensions for example by role, by department, teams, skills, allocation, etc. It helps different people to identify their particular information at the right time which further assists in decision making.
3. Consider overall, strategic and billable resource consumption
The system should be able to provide short/long term forecasting of billable, well-thought overall utilization. This makes sure that active steps are taken to avoid last minute mishaps and generate high utilization coupled with protective business profitability.
We hope that the above content has helped you to identify your resources and management tools and will aid you in making your business bigger and better!