Resource Capacity Planning: Why It’s the Basis of Multi-Project Management

Resource capacity planning as an essential part of project planning is one of the most essential things that drive the success of any project, especially if we're talking about complex multi-project environments with a shared resource pool. Let's dwell on the topic of resource capacity planning, its importance, roadblocks, and best practices.

What is resource capacity in project management, and why plan resource capacity?

Let’s start with the question, “What is resource capacity planning in project management?” Capacity planning is identifying how many (or how much) resources, both human and material, you’ll need to deliver the planned projects on time and within budget. Resource management and capacity planning go hand in hand and together ensure the success of project management efforts. Resource capacity planning, and especially a good capacity planning strategy, allows project managers to establish a smooth workflow across a project portfolio and avoid bottlenecks. And this is true for the following reasons:

• Strategic capacity planning allows you to deliver the desired scope of work with your current resources, i.e, without hiring additional resources.

• Comparing capacity with demand gives you a real picture of the state of things: whether you'll be able to deliver the expected projects on time and within budget, or you'll have to shift the project timelines, or spend extra budget hiring additional staff.

• It improves resource utilization: by properly planning resource capacity, you know not only the number of resources you'll need but also resource requirements (e.g., experience, skill sets), and when further allocating the right resources to the right projects and tasks you improve resource usage, balance their workloads, and as a result, get better team productivity. 

• It contributes to job satisfaction and motivation in employees because they work at their own pace, without being overloaded, in a stress-free environment.

• Careful planning minimizes potential risks of budget overruns and enhances financial performance because you know in advance how many resources you need, and this prevents extra expenses for last-minute hiring. Therefore, understanding project resource capacity is crucial at all stages of the project life cycle.

• As a result, planning capacity in advance increases customer satisfaction and contributes to business growth: projects are delivered on time and within budget.

Therefore, the benefits of capacity planning are obvious, so now let's think of the consequences of improper capacity management and the wrong capacity strategy.

Consequences of inadequate capacity planning or the absence of a capacity plan

If you don’t properly plan your resources’ current capacity, you’ll undeniably face one of the following issues:

• The gap between available resources and the project demands results in overallocation, bottlenecks in production, missed deadlines, and budget overrun.

• Overloaded key resources as a result of skill gaps, when several projects require a resource with certain skills at the same time, and underutilized resources whose competence isn't required at this period of time.

• Increased waiting times: due to resource dependency between projects, an overloaded resource or team results in increased waiting times, when a successor task can't be started because the predecessor one hasn't been completed yet.

• Cost overrun as a result of longer project execution and/or hiring additional (unplanned) resources.

• Missed project due dates as a result of total project management chaos.

Why does this happen? Because of inefficient utilization of resources: when you’re short of required capacity, all you can do is either assign additional tasks to your resources or shift some project timelines to be able to deliver the most important ones on time. The latter is an option, but proper resource planning helps to avoid such situations and deliver the expected number of projects within the existing constraints. Effective capacity planning is a prerequisite for future success in your project management effort.

Resource capacity planning vs resource planning 

These two concepts are often confused in project management, so let’s figure out the difference between them.

Resource capacity planning is a more specific concept as it involves measuring the number and amount of all kinds of resources necessary to staff the planned projects and analyzing the gap between the current demand and available supply. The goal of capacity planning is to ensure that a company has enough resources to initiate the planned project activities. It also involves analyzing the future demand if some projects are going to be initiated later.

Resource planning is more general as it involves determining all kinds of resources needed to staff the projects, with further resource allocation to the right tasks at the right time. Its goal is to staff the projects with the necessary resources. 

Let's consider a resource capacity planning example: a company running multiple projects wants to initiate one more. Therefore, a resource/project manager needs to know if they can deliver the planned scope of work on time. They should analyze actual and future capacity and availability of their resources and match them with the demand coming from the planned projects.

Both capacity and resource planning are essential for the success of any project, especially for multi-project environments with limited resources.

Project capacity planning process

So, where to start? Start with a resource capacity plan.  

1. Identify the real capacity of your teams, considering days off and vacations.

2. Analyze the actual demand coming from the planned projects; in other words, make an accurate demand forecasting plan. 

3. Prioritize projects and tasks within them. 

4. Build a bridge between future demand and capacity to make sure there aren't any capacity gaps, at least no overload. 

5. Create a match strategy to bridge resource availability and the future demand. 

Capacity planning strategies

• Lead strategy aims to hire more resources to meet the demand.

• Lag strategy fits small companies as it implies a conservative approach to capacity planning: capacity is added only after the actual demand has grown.

• Match strategy is a flexible approach that helps save money and increase capacity only in case of a real need: it implies constant monitoring of resource demand and available capacity with further incremental adjustments.

So, what strategy to choose? This depends on the number of ongoing projects, resources, and the size of the organization.

Resource capacity planning best practices and resource capacity planning tools

Modern project management software solutions are the tools that help not only plan projects and allocate resources, but also can be used for workforce capacity planning with further management of all aspects of projects up to their successful completion. At least Epicflow does: it's a multi-project resource management tool that also acts like a capacity planning software solution. 

Let’s see how exactly through the example of Epicflow. 

1. First, to plan resource capacity, you need to know the exact number of projects and project requirements.

2. Then you need to prioritize these projects and their tasks. If you have multiple projects and limited resources, capacity planning should start with the right priorities. Solutions like Epicflow have advanced planning tools that analyze project-related data within seconds and prioritize projects in a portfolio and their tasks quickly and efficiently. 

3. You need an access to project and resource data in real time to be able to promptly react to any changes happening to your project environment, especially availability of resources: a key resource can get an unplanned day off or sick leave and you'll have to promptly substitute them to keep projects on track.

4. To ensure project success, cover business demands, and achieve organizational goals, you should make only data-driven decisions. Project management tools help project and resource managers make informed decisions and significantly improve capacity planning efforts with scenario modeling. For example, Epicflow proactively supports informed decision-making with scenario planning. You can try different capacity planning decisions and choose the ones that will bring the most optimal results. 

If there are capacity constraints and a company needs to deliver an extra project and cover capacity gaps, a project management software solution can suggest options to choose from: either move milestones, or reallocate resources, or stagger upcoming projects and start them later to be able to deliver others on time, or make some capacity adjustments and hire an extra resource.

Conclusion

Therefore, workforce planning allows companies to deliver the planned projects and reach project goals and business objectives without stress, as project leaders know the actual capacity and future requirements coming from projects and can define how many resources they need for successful delivery. Besides, proper capacity planning contributes to the company's sustainable growth as it helps analyze whether it's possible to initiate additional projects without extra expenditures. At the same time, capacity planning outcomes significantly depend on the tools a company utilizes. Today's project management software solutions are the tools that can be used as capacity planners with extra capabilities for efficient project and resource management. With the right capacity planning strategy, a balanced approach, and a modern capacity planning tool at hand, your project plans will always be crowned with success.