The next best thing to being able to predict the future! Keep standards high and clients happy by introducing demand management to your business.
One of the biggest challenges businesses face is meeting customer demand.
While every business under the sun exists to provide its customers with a great product or service, getting them what they want when they want it is easier said than done.
This is especially true for professional services businesses, where individual client needs change on a project-by-project basis. And as all project managers know all too well, without adequate strategic planning client requests can quickly become overwhelming.
That’s where demand management comes into play. In this guide, we’re breaking down how demand management can benefit project and resource management and how to implement it in your business.
Demand management is a strategic process that helps businesses understand, manage, and meet consumer demand.
This involves accurately forecasting demand, anticipating changes in factors that will impact demand such as market trends, economic conditions, and regulatory requirements, and taking proactive steps to mitigate the impact of shifting client needs on business operations.
In project management, this will typically involve forecasting demand, prioritizing projects, and aligning resources to best meet client needs and deliver successful projects every time.
In an ideal world, we would always know exactly what every customer wants six months in advance. Having a concrete understanding of what people wanted and when would make meeting their expectations a breeze!
But in the real world, demand management is the next best thing available to us. Running a demand management process in a services business can help project and resource managers achieve many important strategic objectives, such as:
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If your business provides a product or service to customers, you need to be on top of demand management. Why? Well, without demand management, it becomes impossible to know whether your business’s staffing levels are aligned with anticipated demand. If you have too many people or too few, the outcomes can be catastrophic.
Let’s put this into perspective by looking at a couple of examples of what may happen if you fail to anticipate increases or decreases in demand.
Firstly, imagine you work for an IT consultancy that supports businesses across the globe, including the UK, where a new government regulation is passed requiring all businesses to upgrade their cybersecurity measures.
This leads to an increase in demand from your UK-based clients. However, the business wasn’t aware of this new regulation and failed to anticipate the spike in demand, meaning it wasn’t adequately prepared to meet project demand. Your teams don’t have the capacity to take on the influx of projects, but turning away business will reflect poorly on the consultancy’s reputation, which leads staff to be overworked in an attempt to manage demand.
On the flip side, failing to anticipate decreases in demand can be equally frustrating. Imagine the same IT consultancy suddenly experiences a drop in demand due to economic hardships leading several big clients to suddenly end their contracts.
In this situation, the business will have excess capacity, meaning the workforce is underutilized and hemorrhaging money.
Demand management and capacity management are not the same thing, but they are closely related.
While demand management is focused on understanding the factors influencing customer demand, allowing business teams to plan accordingly, capacity management is all about ensuring a business’s human resources are optimized to meet this demand.
So, these two concepts work together, with the former informing the latter; demand management determines the demand, and capacity management ensures the business’s resources can meet it.
Learn more: How to Measure Capacity vs Demand ➡️
Here are some real examples of the challenges that can be addressed through demand management.
If you work in the professional services industry, you’ll know that client needs are rarely static. Ideally, clients would require the same support day in and day out, but things are rarely that simple. There are many reasons why client needs may fluctuate, such as:
Demand management helps businesses manage changing client needs by providing a process for anticipating and responding to fluctuating demand.
Teams are often required to work on both internal projects that serve the business's infrastructure, and external, paid projects for clients. Balancing the two can be challenging for resource managers - so accurate prioritization is important in project portfolio management.
Demand management allows resource managers to plan internal projects around demand, ensuring resources are allocated to initiatives that generate business value. For example, teams will have more capacity to take on internal projects during slower periods.
As we’ve touched on, a major benefit of demand management is that it supports informed resource capacity planning.
By accurately forecasting demand for the coming months, managers can make informed resourcing decisions based on the information gathered. Activities may include:
We’d be willing to bet that close to 100% of managers are interested in improving cost efficiency, meaning delivering projects at the lowest possible price while still meeting (or exceeding) customer needs.
One way to do this is through effective cost control, which aims to reduce unnecessary spending in a business. Demand management can help businesses manage labor costs, not necessarily by cutting wages or reducing headcount, but by optimizing how businesses use their human resources.
This typically looks like using historical data to match resource capacity to anticipated demand, helping resource managers understand the demand for different roles and skills, anticipating hiring needs, and ensuring that businesses don’t end up with more staff than they need.
Ready to put theory into practice? Here’s how the demand management process ensures client needs are met.
The first step is to look at the external factors affecting demand for your business’s services. Understanding what the competitive landscape looks like, how market conditions impact your target customers, and what other potential changes in your industry may affect demand, will enable you to create a more informed plan of action.
The next step is to use the gathered information to forecast future demand. When you understand what your target customers want and what factors influence their decision-making, you can more accurately estimate demand for your product or service.
In demand forecasting, you’ll use market insights, sales data, and analysis of customer behavior to predict demand for specific products or services. This will allow you to prioritize moving forward. You may even notice that demand is dwindling and decide that adapting your business offering to better meet market needs is the right move.
Strategic capacity planning is all about supply and demand. A management process that forecasts the people and skills your business needs to meet future customer demand, managers will use project data to work out how much capacity they have to take on new work.
The goal is to deliver great results in the most cost-effective way possible by matching the size and makeup of your workforce to anticipated demand. Reaching ideal capacity utilization also means reducing the risk of wasting money on having too many staff or failing to meet demand because of resource shortages.
Effective prioritization is key to great demand management, especially in periods where demand is especially high.
When supply is limited compared to demand, prioritizing demand helps ensure that you take on only the projects that offer the best value to your business, resources are utilized effectively, and the most critical demands are given priority.
This means developing a systematic approach to deciding which projects should be addressed first. This may involve assessing organizational capacity, potential for profit, and customer health.
Finally, it’s time to optimize! Like many business practices, demand management is an ongoing process, which means you’ll continually need to measure operational efficiency and look for new ways to improve your processes.
Once you’ve completed one round, you’ll likely need to start from the top, as customer needs are constantly changing — as are your business and the services it provides.
Effective demand management relies on good governance and robust strategies. Here are some key tools and strategies to get started with.
Capacity planning software is essential to effective demand management. These tools help you assess your resource capacity and ensure your people are equipped to handle future demand.
Runn, for example, has everything you need to monitor workload, plan future resource needs, and identify potential bottlenecks.
From capacity charts designed to maximize your resources to a nifty people planner that offers the option to include placeholders to help you scope out different scenarios (an invaluable addition when demand planning), Runn is packed with tools built with project and resource managers in mind.
Prioritization is key to effective demand management. By identifying which clients, projects, and demands take precedence, you can make the most of your resources, maximize your team’s productivity, and drive revenue!
Prioritization frameworks make juggling multiple demands easier than ever. The Eisenhower Matrix, for example, is a great framework to get started with. This framework simplifies the process of prioritization by helping teams rank projects and tasks based on their importance (how much value they offer your business) and urgency. Using a simple matrix, projects are divided into four ranked quadrants:
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Demand analysis is a critical strategy in demand management which allows businesses to accurately assess demand for its current offering and identify other profitable opportunities.
This strategy uses historical sales data and market analysis to anticipate demand, ensuring businesses are always operating in a competitive market where there is demand for their services.
It’s clear that demand management is crucial to running a successful services business. While demand management may seem like a big beast to tackle, it’s more than possible with the right demand management processes and tools at your disposal.
Try Runn for free today to explore your data, begin planning demand, and maximize your most valuable resource — your people.
