What is Capacity Planning in Project Management?

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What is Capacity Planning in Project Management?

Getting the balance between production capacity and resource management is always a challenge. However, it’s the key to ensuring the right resources are available at the right time and crucial to managing costs and return on investment (ROI).

What Is Strategic Capacity Management?

Strategic capacity management is the process of ensuring you have the resources you need to complete projects efficiently. Using capacity planning tools, you can forecast resource utilization for smoother project management. The strategic planning process differs from both tactical resource planning and operational resource planning.

Strategic vs Tactical vs Operational Resource Planning

The strategic capacity planning process focuses on the provisioning of employees or contractors with the skills needed and creating a working schedule to meet demand across a company’s entire project portfolio. This is where effective capacity planning begins by taking a long view of the project time frame. The goal of capacity planning is to ensure both current and future projects are aligned with a company’s strategic goals and make sure to match strategy to capacity requirements. By comparison, tactical resource planning focuses more heavily on the formation of forming project teams, ensuring team capacity, and committing resources to specific projects. Operational resource planning targets individual projects at the task level. As each of the phases is interconnected in multiple ways, effective capacity planning in project management requires the right capacity planning tools and resource management tools, such as those provided by Cora Systems.

The Benefits of Capacity Planning

Strategic capacity planning can help provide a more efficient way to manage resources and bring projects in on time and under budget. By anticipating needs, managing resources efficiently, and running scenarios to prepare for any developing problems, you can realize several benefits, including:

Maximum Utilization Rates: Successful capacity planning lets you get more work done with the same number of people and resources
Data-Driven Decisions: When you have real-time data on production facilities, team members, and utilization, you can increase the rate of successful projects with on-time delivery.
Project Resource Forecasting: With complete visibility into project resource demand at both a high level and down to individual projects, you can better project the skill sets needed, the resources needed to deliver projects efficiently, and the lead strategy you need to employ.
Workload Balancing: Helps your team avoid task clashes and bottlenecks by balancing workloads across your team, product line, project, and portfolio.
Scenario Modeling: You can analyze various scenarios to help you prioritize the most important projects. You can also evaluate the impact of short term and long term capacity planning to gauge the impact of various scenarios on your portfolio.

Cora’s Strategic Capacity Management tool provides the control and visibility of the resources you need across every business area. By obtaining a complete overview of resources and assignments, you will always know your current resource allocation and what you need in the future. It helps you avoid resource conflicts that can negatively impact projects, so you can take proactive measures. You’ll know sooner whether you need to increase resources, such as hiring more employees or engaging more contractors, or whether you can reallocate resources to complete projects on time.

Strategic Capacity Planning Facilitates Better Project Lifecycle Management

While businesses today need to remain flexible to deal with uncertainties and changing conditions, it’s easy to confuse agility with a lack of planning. Agile doesn’t mean to just leave it to chance and deal with things as they arise. Instead, agile capacity planning means having the ability to shift as needed based on careful planning. Scenario testing, for example, allows you to foresee how changes can impact projects, so you can adjust resource and capacity planning, lag strategy, and project phasing. This allows you to implement agile strategies to pivot or change when necessary with confidence. Agile capacity management also requires a firm understanding of how changes in the process affect the entire project lifecycle, other projects within your portfolio, and the bottom line. Organizations integrating strategic capacity planning throughout their project lifecycle outperform others.

77% of companies with a mature capacity planning process met their goals compared to 56% of other companies.
67% of companies with a mature capacity planning process stay within budget compared to 46% of other companies.
63% of companies with a mature capacity planning process deliver projects on time compared to 38% of other companies.

Effective capacity planning also decreases scope creep and project failures. 47% of companies report scope creep while organizations with a mature capacity planning project limit scope creep to just 30% and cut failure rates by nearly half. Companies using strategic capacity management and the right project management software cut waste considerably. That’s an important element when you consider that 9.9% of every dollar is wasted by most companies due to ineffective planning. For every $1 million, that means nearly $100,000 of expenses could be cut if the management team employed an effective project planning methodology. According to the Project Management Institute, around $1 million is wasted every 20 seconds collectively by organizations worldwide. That’s equal to nearly $2 trillion dollars in waste over a one-year period of time.

The Benefits of Project Portfolio Management Software

No matter how interlinked your data is, if you are using spreadsheets, email, faxes, or word documents, you likely have important data living in silos that are inaccessible to some key stakeholders. You likely don’t have a way to effectively communicate and you may struggle to get real-time data without a lot of cut and paste. Choosing the best project portfolio management (PPM) software is one of the first steps in developing your strategic planning. PPM tools allow you to create a more seamless, centralized, and data-driven approach to project management to keep all of your stakeholders connected (and committed) to projects. Here are some of the key benefits that the right PPM software will bring to your capacity planning:

Reduces Manual Processes

By centralizing the management of your entire project portfolio within a single PPM platform, you are bringing together all the information you need in one place. This significantly reduces the manual work you have to do to keep your data aligned. It provides that “single source of truth” that everyone can count on rather than worrying about which spreadsheets have been updated or whether there’s a formula error somewhere along the line. By digitizing your data, you’re also creating more efficient business processes. This lets you focus more on data analysis than on data collection.

Better Decision Making

When you are confident in the data you’re seeing — and everything is in one place — it’s much easier to analyze the data and make better decisions. Real-time data with high data integrity makes everyone more comfortable making decisions. The right PPM solution allows C-suite execs, project managers, project leads, and outside contractors to access the information they need whenever they need it. Your project portfolio management software also plays a key role in deciding which projects to fund and how they fit into your overall portfolio, especially when it comes to capacity and resource planning. It can help you visualize the ROI as well as prioritize work. Your PPM software can help you build the case for more resources, shifting resources to higher-profile projects, or rejecting new low-value projects due to current commitments.

Data Visualization

Live dashboards can help provide snapshots for individual projects or your entire portfolio. This lets you see what’s happening at a glance and how you are trending against your milestones. The right PPM solution provides you with insight into potential roadblocks or troublesome areas so that you can be proactive rather than reactive.

Easier Reporting

A lot of work hours have been wasted over the years putting month-end reports together. If you’re doing it manually, it may require detective work to hunt down the information you need or get answers from project managers. You may also have to reconcile multiple documents that may have conflicting information. Then, once it’s compiled, the information is immediately outdated. When you employ a real-time PPM platform, your information is always up-to-date. You can reduce the time it takes to create reports from weeks to minutes.

Visibility and Governance

Effective strategic capacity planning using project management software provides tighter controls of governance and greater visibility for everyone involved. It provides the audit trail you need for expenditures and tracks every aspect of your project.

Capacity and Resource Management Is an Ongoing Process

When it comes to strategic capacity management, it would be nice to put together a plan and put it on the shelf. In reality, capacity planning is an ongoing process that requires balance and expertise to manage effectively. In today’s agile environment, companies can no longer do annual project planning or choose to only revisit plans quarterly or when crises arise. The most effective organizations view capacity planning and project portfolio planning as an ongoing process. This is the best way to see potential hurdles before they become big problems and adjust capacity and resources as needed to bring projects in on time and budget. A modern portfolio management solution will equip you with the tools you need to balance capacity against demand and position you for success. Contact the project portfolio planning experts at Cora Systems today for a personalized demo.

Project Management Blog

October 27, 2021

Capacity Planning Project Management

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