Capacity forecasting is an important part of planning your business growth. Here are some tips to make sure your capacity forecasting is on point.
Capacity forecasting is one of the most important elements of resource management. By understanding and anticipating future resource needs, organizations can ensure they have the people and skills they need – when they need them – to meet business objectives.
Companies don't want to over-commit their employees and under-deliver on the promise of a quality service or product. So, in order to avoid this, companies need a way to predict what they will be able to accomplish within a specific timeframe and with the resources available.
This is where capacity forecasting comes in. It enables companies to take proactive steps and address any gaps between demand and supply.
But capacity forecasting isn't always straightforward. Modeling future scenarios and predicting their impact on capacity is a process that involves a ton of variables and complexity. You'll want to set yourself up for success from the get-go.
Read on to find out how.
Capacity forecasting is the process of predicting how many resources you're going to need and how much time you're going to need them for. It's also sometimes called demand forecasting or resource forecasting. This means that when you think about capacity, you're thinking about the total amount of resources that you can use right now.
Forecasting capacity helps you better plan for the future and avoid running into problems down the road. A useful capacity model helps you make educated predictions about how many resources will be necessary for tasks down the road and can help you predict when you might run into problems.
The main reason you want to forecast capacity is to make sure you have enough resources available when you need them. If everyone works overtime or you have to hire extra people because you didn't have enough foresight, these costs will come out of your budget — or worse, the project itself may have to be delayed or cancelled if there aren't enough funds left in the budget for it.
Here are some more benefits of capacity forecasting to consider:
Capacity planning and forecasting is an essential part of many businesses, but one that is often given short shrift. This isn't a surprise: it's traditionally been a pain to do, and it feels like more work than it's worth when you've got a lot else to focus on.
And while the classic approach of using Excel spreadsheets may be familiar here, it has many shortcomings. Particularly if you work in a big organization, with lots of teams and large datasets, sticking with Excel can be a false economy.
Spreadsheets are rather high-level, won't give you the granularity you need, get clunky when you try to run large amounts of data through them - and they are very easy to break.
This is why using capacity planning software can save you hours of work and lots of headaches. So, let's dig into how to do capacity forecasting properly.
Demand forecasting and resource capacity planning always starts with status quo evaluation.
Look into your teams and see what their capacity is like. Is there someone who has some time free to hop on a new project? Is there an expert who has too much work on their plate and needs some colleagues to help them out? Do you have the right resources, with the right availability to cover all the workload?
Capacity management requires an all-in approach where you are always aware of the current status of your resources.
For example, in the visual below (a snapshot of the People Planner interface from Runn) you can see the capacity of your designers weeks in advance. You can also look at the quarter, 6 months, or a year.
The key to successful forecasting lies in knowing your business capacity and demand.
For example, does your business tend to be seasonal, with spikes in customer requests at specific points during the year like the holiday season? Is it, on the contrary, very stable, and you get an equal influx of new projects every month?
Understanding those patterns will help you predict whether capacity demand will increase or decrease when you least expect it. Being ready for different turns of events will make your capacity planning strategy risk-proof.
Projects rarely go exactly as planned. Project requests and priorities can sometimes turn on a dime. For capacity and resource planning, this means that you need to be ready for unexpected turns along the way.
What if somebody takes time off or leaves the company? What if you need to shuffle your resources and reassign someone to another project? How do you make sure business keeps running as planned in spite of any hiccups?
You run what-if scenarios to consider different routes your project could take.
In short, having a capacity planning model on the table will make it easy for you to create a capacity report and estimate capacity vs. confirmed workload. It is this visual representation of your current resources' capacity that will help you ensure realistic capacity forecasting at all times.
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Of course, if capacity planning was easy, more people would be doing it. The fact is, it isn’t always a simple process.
In our recent webinar on Forecasting Best Practices for Resource Management, we asked participants about their capacity forecasting practices. They shared that while two-thirds do capacity forecasting regularly, no one felt their forecasting process was very accurate. That means 100% of respondents are missing out on valuable insights!
Learn more: Forecasting Best Practices for Resource Management (Webinar 🎥) ➡️
Here are some of the major challenges you might face.
The best way to combat these challenges is to implement a resource management platform.
And yes, we know. Runn is a resource management solution, so of course we believe in the value of a platform that does the heavy lifting for you when it comes to resource management.
But whether you're using Runn or a different tool, a resource management platform helps you:
Obviously, our first best practice is to use the right tools 👆 especially technology that streams live data, so you’re always up-to-date.
Here are some more capacity forecasting best practices taken from two resource management experts on our recent webinar ‘Forecasting best practices for resource management’.
One challenge for resource managers is that they only become aware of a project once the deal has been closed – and this can have huge implications for resource planning. So Julie McKelvey recommends building closer relationships with your sales team.
You need to work with the sales team and look at sales pipeline and start building those relationships, because they are going to have much better insight into that future planning than you might have. Generally in an RMO, you don't see that project until it's closed and commitments have already been made to the customer. But you need time to recruit, onboard. Give your sales team an outline. Say “This is the information I need”.’
In her previous role, Julie put an automated capacity planning model in place, based on historical data and averages, and the sales pipeline.
Following on from the point above, Lyssa recommends having a trigger point where you begin resource planning for projects BEFORE the deal closes – particularly if it is a high-value project for the business.
What I recommend is, when a sale or project is starting – even an internal project is coming in – and you're 60-70% sure that it's going to happen, you really have to jump into your RM tool and start looking at, what is that going to look like if I do have to do this potential work. Where are my capacity gaps? What am I going to have to shift to make sure that that actually delivers? Do I have to hire?’
This doesn’t just help your project and clients succeed, it also helps other internal teams.
It’s the bane of HR’s existence when a PMO calls and says “We need five project managers and 10 engineers by tomorrow”. It takes three months to hire them. It takes two months to onboard them. HR needs leeway. The finance department needs to know there's going to be additional costs. Capacity forecasting really arms the entire organization to make better decisions.’
Julie also recommends investing time in getting the foundations right – building a skills inventory, centralizing data and tools, making sure everyone knows to regularly update information in the system – so that you have the information you need at your fingertips, and you can be confident that it is accurate and up to date.
Lisa agrees that data is key:
When you don’t have data – clean data or good data hygiene – in resource and project management, you’re acting blind. You have no idea what the consequences of your actions are… So there has to be buy-in at the highest level and flow down to everyone. Data isn’t something you put in and forget about. There has to be real dedication to maintaining data.’
Our webinar survey above highlighted that our participants felt their capacity forecasting processes were inadequate. So what can be done? Our experts advise reviewing your workflows regularly to ensure they’re fit for purpose. If people aren’t providing the data they’re expected to, don’t just get frustrated, find out why.
Workflows might work on paper. But what about in practice? Are they too time-consuming? Frustrating? Can we make it more efficient? Can we tone it down? The best way to do that is to ask people. If they’re not doing something, what’s blocking them? Take on board their feedback and do something with it. Like a revised process, or implementing office hours to provide support for people.’
I love templates and I use them all the time,’ says Lyssa. ‘Obviously, every project is different. But if you’re building an app, you’re probably building it the same way. If you’re delivering an infrastructure change, you’re probably delivering it the same way. There's probably the same phases, milestones… a lot of similarities. So setting up templates helps you see what's going to do to your finances, to your capacity plan, to work out who you need on the project. So using templates can be super powerful.’
She goes on to emphasise that, when you have a project that goes exceptionally well - bottle that magic! Make the most of the wins so that you can replicate that success in the future:
If you have a project where everything went right – you made the right decisions, you had the right team – you need to be make them templates, so you can leverage your learnings and your experience and reapply that to the next project that's similar.’
Lyssa advocates for conducting retrospectives to improve forecasting accuracy. This should happen at the end of every project and at regular intervals during the year – she suggests quarterly. A retrospective is an opportunity to compare your resourcing plan against what happened in real life. Was your forecast accurate? If not, why not? Reflecting on how well you forecast project resource needs helps you improve that process in future.
Without an accurate capacity forecast, over-committing workers to projects that they can't finish or under-committing them to projects that they can finish is inevitable.
The use of capacity forecasting allows managers of projects and business units to make decisions with a full understanding of the limits of their labor force and avoids situations where too much work is given to too few people.
To forecast your capacity with Runn, book a demo today!
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