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Nicole Tiefensee

Capacity Forecasting: A Future-Proof Guide

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 parts of project management. It's one of the earliest events in a project, and it's an important guidepost throughout the project.

It comes into play because a company doesn't want to over-commit its employees and under-deliver on the promise of quality service or product. In order to avoid this, companies need a way to predict what they will be able to accomplish within a specific timeframe.

Breaks in capacity forecasting, on the other hand, can lead to bottlenecks, which cause delays and even loss of revenue.

So how can you do effective capacity forecasting and is using Excel one of the best practices today?

Read on to find out.

What is capacity forecasting?

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.

Why capacity forecasting is important

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.

And here are some more reasons to consider:

  • It allows for the creation of realistic project plans, especially when you're planning multi-year projects or initiatives.
  • It helps account for "surprises" in the near future that might upset your plan, like sudden turnover or a new initiative.
  • It enables you to make adjustments in time to prevent any major problems that could result from not having enough resources available.
  • It guides you to become better at budgeting by giving you a more accurate idea of how much money will be required in the future.

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.

How do you do capacity forecasting?

To always avoid unnecessary mistakes, let's first consider how not to do capacity planning and forecasting.

Here, the biggest anti-practice is using Excel, especially if you work in a big organization, with lots of teams and large datasets. Spreadsheets are rather high-level, won't give you the granularity you need, can get clunky when you try to run large amounts of data through them, and they can simply crash when what you try to bite off more than you can chew.

This is why using advanced capacity planning software can save you hours of work and lots of headaches.

Here's how you do it in Runn.

1) Look into current capacity

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 workload 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.

If you want a more granular view, you can filter capacity charts by roles, skills, employment type, people, tags, and projects.

For example, in the visual below, you can see the capacity of your designers weeks in advance. You can also look at the quarter, 6 months, or a year.

2) Analyze business and resource demand

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.

3) Run what-if scenarios

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 force majeure?

You run what-if scenarios to consider different routes your project could take.

4) Use a capacity planning model

checking how much capacity is left is effective resource capacity planning

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.

Final thoughts

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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