Growing a business takes consistent planning, hard work, and dedication. However, companies have a finite workforce and tools at their disposal to keep up with their growth. More projects and orders are always good for any business, but time and workforce constraints often make it overwhelming and challenging for companies. Capacity planning is a battle-tested process companies use to plan their workloads effectively. It lets your team accurately identify how much work they can absorb while considering the available resources at hand. In this article, we’ll talk about how capacity planning can benefit your business and how to get it right.
What is Capacity Planning?
Capacity planning, at its core, is the process of matching available resources such as labor and equipment to project needs. A good capacity planning strategy must take into account the working schedule of your team, skill sets required for the job, and the capacity of equipment and tools. Capacity planning allows team leaders to maximize resource usage and meet project needs. Once you have planned capacity, it becomes significantly easier to plan your resources effectively. Resource planning is a follow-up process to capacity planning and involves setting deliverables to ensure that tasks stay on track from start to finish.
Benefits of Capacity Planning
Successful companies think of capacity planning as a fundamental process in their day-to-day operations. When done right, capacity planning can bring immense benefits.
Increases efficiency
Overloading your team with too many tasks at once affects the quality of work and can stress out your team members. Capacity planning enables you to determine the best possible course of action from the get-go. Capacity planning optimizes resource usage by helping you adapt workloads to the availability, skill set, and efficiency of everyone involved.
It helps you adapt better to changing workloads
It is impossible to overstate the impact of capacity planning in eliminating bottlenecks. Often, the risk of not completing projects within promised timescales is relatively high when you haven’t planned your workloads efficiently, resulting in customer dissatisfaction and losing business to competitors. A well-implemented capacity planning process can help you assess your long-term strategies and position resources in advance to achieve them. It can highlight the need for additional equipment or resources in the future to handle increased workloads.
Capacity planning strategy
When it comes to capacity planning, there is no one-size-fits-all. Every organization uses different capacity planning strategies to suit their needs and long-term strategies. However, the fundamental idea behind every capacity planning approach remains more or less the same. It starts with identifying the workload your team can realistically handle right now while also looking forward to your company’s needs down the road. A key metric often used in capacity planning is capacity utilization rate. Capacity utilization rate is the percentage of the total potential output that an organization uses. In other words, it is the relationship between actual output produced and potential output if all available resources were operating at fully used. A rate of 85% is considered the optimal rate for most companies, and anything above 85% indicates the need for additional resources to handle a potential surge in workloads in the future.
Let’s look at how you can create an excellent capacity planning process in a few simple steps:
Identify workloads
The best place to start is to outline everything your team will work on within the next 3-6 months and determine how long each project will take. It is always a good practice to combine your demand forecasting process with capacity planning to account for workloads that may not appear in your current list.
Build a realistic schedule
The next step is to build a realistic schedule without overstretching your team. It’s always a good idea to build a buffer to handle unforeseen events. When building a schedule, the most crucial aspect is considering your team’s schedule, skillset, and efficiency.
Track everything
Keeping track of changes and recording progress is critical for having an effective capacity planning process. An ERP software can help you make this step more accessible and collaborative.
Evaluate and improve your capacity planning process
Looking back at how effective your capacity planning was for previous periods can give you valuable insights into how you can improve things moving forward. If you’ve had unforeseen production delays due to equipment downtime or resource availability, maybe it’s time to evaluate a new capacity planning strategy or tweak your existing process. It’s all about continuously improving processes to increase efficiency and profitability.
Capacity Planning with AccelGrid
Capacity planning is an essential process of running any successful company, and trying to keep track of multiple things at once can seem overwhelming. With AccelGrid’s Cloud-based ERP software, you’ll have every core business process in one place so that you can get the most accurate reports in real-time and make capacity planning work for you. Contact us today to learn more about our solution or start your 14-day free trial.
