What is capacity planning? Tips to apply the right strategy

Before you start baking a cake, the first step is to make sure you have the right amount of ingredients. If you're short an egg or down a little bit of sugar, your cake is sure to come out tasting a little bit odd. 

The same is true for a big project: If you don't have enough resources to complete the project, it will not turn out as expected. To make sure you have all of the right ingredients when you need it—in this case, team members, skills, and tools—use the capacity planning process.

What is capacity planning?

Capacity planning is the process of determining the potential needs of your project. The goal of capacity planning is to have the right resources available when you’ll need them. Resources could mean individuals with the right skills, time available to add another project, or the necessary budget.

Capacity planning strategies

There are three types of capacity planning that you can use in different scenarios to optimize production capacity.

Lead capacity planning

Lead capacity strategy, or lead strategy, is the process of increasing production capacity when you're in anticipation of a high demand. 

Example: If you’re a retailer, you may need to hire an influx of seasonal workers during the holidays, whether that’s for a whole season or just for a seasonal sale. By anticipating higher customer traffic, you can better staff your team and add additional headcount over a short period of time. 

Lag strategy planning

Lag strategy planning is the process of increasing production capacity when you’re experiencing  a real-time demand.

Example: Lag strategy planning is often used in medical care, social work, or the restaurant industry when someone is "on call." Depending on how busy your team is, you may call additional team members in to make sure there are enough resources (in other words, team members) to cover all the customers’ or clients’ needs. 

Match strategy planning

Match strategy planning is a combination of lead capacity planning and lag strategy planning. The process of match strategy planning requires slowly increasing capacity in small increments until you reach the desired resource utilization.

Example: Let’s take the previous example of the restaurant industry—as a floor manager, you may have several different employees on call for the night. If you get an unexpected large party in, you may decide to call in more than one server to cover until crowds die down.

The capacity planning process in five steps

The capacity planning process can vary from company to company, but there are a few core steps that happen in every process: 

1. Forecast your anticipated demand

If you know you have a new project coming up, make an educated estimate on what work needs to be done for these projects. This will give you an idea of the capacity that you’ll need to complete the project and you can compare that to the current capacity you have on hand.

2. Determine required capacity

Based on your initial estimates, approximate the capacity you’ll need to complete the work you forecasted in the previous step. Try using a common unit of measurement—like hours—or a project estimation tool—like t-shirt sizing.

For example, engineering managers estimate capacity planning according to the number of hours needed to complete a project.

3. Calculate the resource capacity of your current team

If you’re adding another project to your team’s plate, you want to make sure they have the capacity to handle it so they don’t burn out.

If the average person can do approximately 30 hours a week and they currently have projects they are working on, see how much capacity they have in a week by subtracting their current workload in hours from the average 30.

4. Measure the capacity gap

Based on the capacity needed for a project, measure how your current resources compare to the anticipated demand.

5. Align capacity with demand

Look at the previous gap in capacity and optimize current and available capacity so they are balanced. If your team is currently at capacity and can’t take on additional work to complete the project, add more team members in the short term to get the project done. If you have excess capacity, consider adding another project to effectively optimize your available resources.

Benefits of capacity planning

As a project manager, one of the best things you can do to support your team is to create a capacity plan. Knowing the capacity requirements for different projects can help prevent bottlenecks and keep a supply chain flowing. Here are the most important benefits of capacity planning:

It prepares you for different scenarios

A well-strategized capacity plan can help prevent scope creep and take pressure off of your team. If you know the steps you have to take for each type of capacity—whether that’s excess capacity or a lack of resources—you’ll be able to meet demand during any given period.

It optimizes team bandwidth

Effective capacity planning aligns your current team’s skill sets with their availability for new projects. If there are not enough available resources for a project, you’ll know that you need to add more resources to your team. 

Understanding your team's skill sets and knowing their capacity for additional work is crucial. It can speed up the decision-making process when it comes to staffing and prevent burnout—which 71% of workers experienced at least once in 2020.

It minimizes production costs

When you manage your team's capacity, you're optimizing your resources for the scope of work that you need to complete. This means that you're not paying for more resources than you need, ultimately minimizing production costs.

For example, if you have 12 members on a team working on Project A that only needs nine members, you can allocate three of those team members over to Project B, minimizing the spend on Project A.

It makes planning for the future easier and more accurate

Capacity planning isn’t just helpful for your current projects, it can also help you scope out capacity needs for the future. When you create a capacity plan for one project, you can use that as a template for a similar project in the future.

That template will be a useful starting point and you don't need to forecast capacity requirements from scratch. This can save your team time and expedite the capacity planning process.

It creates transparency

Your capacity plan will highlight any inefficiencies that you can optimize. This kind of data is highly valued by stakeholders who like to be in the know when it comes to how they invest their resources and money.

What's the difference between capacity planning and resource planning?

While they are sometimes used interchangeably, capacity planning and resource planning are similar but slightly different project planning strategies. 

Capacity planning focuses on the supply and demand of your resources. The idea is that a strong capacity plan can forecast when you’ll have an increase in demand for more resources so you can anticipate that gap. 

Resource planning focuses on the resources that you already have and where you can allocate those resources. Resource capacity planning is a combination of the two: anticipating the need for more resources in the future.

Capacity planning tools

There are many different capacity planning software and tools on the market, and finding the right one depends on what you want to prioritize for your team. Some resource management tools are highly specific and focus only on capacity planning or resource management.

Using a work management tool like Asana can help you manage resources, monitor your team's workload, and streamline communication—all in one platform. Take the team at Hudl for example. They regularly monitor workload in Asana so they can easily reassess their team’s capacity and reassign work before anyone burns out. 

Because they can view their work in one shared space, no one is overbooked.