Capacity Planning:
Definition, Examples and Synonyms
Resource management, capacity planning and capacity management seek to bring the demand for employeeEmployeeSynonym for → ResourceResources are all the people, places and things that you need to complete projects. The most important resource? Employees, of course! capacities and skills in line with their supply. The coordination between supply and demand is a part of regular operations in the short and medium term in the form of portfolio capacity management and in the long term as part of a strategic workforce capacity planning process.
- Operative (short and medium term): This involves planning existing capacities and skills for ongoing projectsProjectA project is a time-limited undertaking with defined objectives and resources that delivers unique results and often includes complex tasks..
- Strategic (long term): Stakeholders anticipate future capacity demands based on their plans and take measures to ensure that this capacity demand is met.
In simpler terms: The goal of capacity planning is to make sure the right resources are available at the right time so an organization can fulfill its obligations.
A Practical Example
Imagine you work in a company that conducts web development projects for clients. Your team consists of developers, designers and project managers. One day, you receive a request to create a new website for a client.
- Capacity Assessment: You take a look at the available resources in your team and how much capacity they each have. You have two experienced web developers, one designer and one project manager at your disposal.
- Project Requirements: After that, you examine the project scope and identify the necessary tasks and skills. This includes website design, frontend and backend development, quality assurance and deployment. Then, you estimate the total effort required for the project.
- Alignment: Finally, you analyze whether the resources available (capacity supply) would likely be able to meet the project requirements (fulfill demands) and proceed accordingly.
Although this example focuses on one single project, a portfolio and its ongoing projects can be analyzed in the same way.
Synonyms
Although the terms “capacity planning” and “capacity management” are occasionally used in place of resource management and vice versa, capacity planning is just one part of resource managementResource ManagementWhen it comes to resource management, the focus is on the optimal planning, coordination and monitoring of resources. The term “resources” includes things like employees, budgets, materials and time..
FAQ
Here you can find answers to your most pressing questions about capacity planning.
Usually, portfolio coordinators, PMOPMOSynonym for → Project Management OfficeA Project Management Office (PMO) is a permanent organizational unit responsible for the centralized and coordinated management of all projects. staff or resource managers are responsible for aligning available resourcesResourceResources are all the people, places and things that you need to complete projects. The most important resource? Employees, of course! with the demand from projectsProjectA project is a time-limited undertaking with defined objectives and resources that delivers unique results and often includes complex tasks.. Since capacity planning occurs before the execution of a project, project managers are not typically involved.
However, when it comes to building new capacities through training or recruiting, it is more likely that the management or the HR department would be involved.
When you have all relevant information about your capacities and know how to handle them, it offers significant advantages in planning. Especially compared to companies that still base their plans on intuition.
When your company knows exactly what it is capable of and what it is not, the following opportunities arise:
- More precise planning and reliable commitments to customers: You can better estimate what is feasible and make realistic promises.
- Efficient use of your employee resources: You can optimize your workforce.
- Easier growth and expansion into new markets: With clear knowledge of your capabilities, you can expand strategically.
- Increase in the quantity and quality of your projects: You can scale and improve your projects more effectively.
- Long-term maintenance of your market competitiveness: Smart resource managementResource ManagementWhen it comes to resource management, the focus is on the optimal planning, coordination and monitoring of resources. The term “resources” includes things like employees, budgets, materials and time. keeps you competitive.
- Relief and optimal support for your employees: You can distribute workload and nurture talent.
- Timely completion of your most important projects: You won’t miss deadlines.
- Targeted recruitment of key resources or training of new employees: You can act strategically.
- Motivation and long-term retention of your employees: A satisfied team stays longer.
- Quick adaptation to new circumstances and seizing opportunities: Flexibility is crucial.
- Time and cost savings: Efficiency pays off.
The steps of capacity planning depend on the time horizon you’re working with. We distinguish between the following components:
Portfolio Capacity Management (Operative Capacity Planning)
In portfolio capacity management, organizations look at the projects they have planned and the resources/skills they already have on hand. Based on this, they draft a plan for the next months and set priorities for their projects without assigning anyone to specific projects.
During this process, portfolio coordinators typically ask themselves:
- What capacities and skills do we currently have?
- Which projects could be implemented when?
- Which capacities and skills do these projects need, and can they be bundled?
- How should we schedule these projects so they can be completed feasibly?
- Are there any dependencies or other overlaps that need to be considered?
Ideally, the portfolio coordinator uses a PPM (Project Portfolio Management) tool, in which employees, resource managers and project managers record current capacities, effort estimates and other relevant data, to get the information they need for portfolio capacity management. They should only schedule the planned projects if they can be realistically completed with the resources currently available.
If there is a discrepancy between the supply of employee capacities and the demand from projects, projects must be reprioritized in the short term. If this discrepancy persists, it may be time to take a look at strategic workforce planning.
Strategic Workforce Planning (Strategic Capacity Planning)
Strategic workforce planning is an important task mainly undertaken by the Human Resources (HR) department and upper management. Using information about capacity demand from project and portfolio management, they make strategic decisions about how to maintain or improve capacity supply in the long term.
There are three key things they consider in their decision-making:
- Market and Order Development: How do we expect the market to develop? How do we anticipate this will affect demand for our product?
- Departures: Will we need to compensate for any expected departures from the company?
- Research, production and new markets: Do we plan to increase our research or production capacities? Enter new markets?
- Bottleneck avoidance: Do we keep dealing with the same bottlenecks over and over?
After answering these questions precisely, stakeholders can take measures to improve the position of the organization. Measures could include recruiting new employees with specific skills or adjusting the planned portfolio timeline to be in line with actual capacities. Operative capacity planning looks at meeting demand in the short term, whereas strategic capacity planning seeks solutions to improve capacity and output in the long term.
The most relevant KPIs for capacity planning include:
- Utilization: This KPI measures how your employees are being utilized. Optimal utilization prevents over or underloading.
- Bottleneck Analysis: Identify bottlenecks and take action promptly. Bottlenecks can hamper efficiency.
- Resource Availability: Monitor the availability of employees and skills continuously. This helps prevent bottlenecks.
In short: At the beginning, yes – but in the long run, it could prove difficult.
Excel is good enough for simple capacity planning in small teams. It’s flexible and a lot of people have access to it. However, once you start planning more projects, resources change and you’ll need to be able to react to changes quickly, Excel reaches its limits.
Typical Weaknesses of Excel:
- Manual data maintenance can lead to mistakes
- Lack of automatic warning for over-allocationsAllocationAllocating describes the strategic process of identifying the correct resources for projects or individual tasks and assigning them accordingly.
- No real-time data or scenarioScenarioIn project portfolio management (PPM), scenarios are potential ways that your portfolio can look, based on a set of well-defined assumptions and portfolio decisions. Scenario planning is used to forecast… comparisons
- A lack of a full integrationIntegrationAn integration is a virtual interface that connects different software programs and enables automated data exchange between them. This allows for more efficient processes, better planning, and consistent information. landscape
If you want to plan multiple projects and teams in the long-term, you’re better off going with a specialized tool like Meisterplan. It’s more efficient and transparent, and there is much less room for human error.
If you neglect capacity planning, you’ll quickly encounter bottlenecks, over-allocations, and delays. Teams will work on too many projects at the same time, you’ll miss deadlines, and the quality of your work will suffer. At the same time, other resources will remain under-utilized. In essence, productivity will go down, and costs will rise.
Typical consequences of poor capacity planning:
- Unclear priorities and stress in your teams
- Projects become delayed and go overbudget
- Unhappy employees because of constant over-allocations
- A lack of a basis for meeting decisions for management and portfolio planningPortfolio PlanningPortfolio planning is the process by which companies decide which projects they want to carry out. This ensures that projects are in line with the company’s objectives and that the…
In summary: Without structured capacity planning, you’re missing the basis for realistic decisions about your projects. This doesn’t just affect single cases—it will have an effect on the entire organization’s ability to implement projects.
Capacity is calculated by determining the available working time per person or team in a defined period.
Capacity = Number of people x available working time per person
Example: Imagine a team with 4 members who each work 30 hours per week. Their capacity is then 120 hours per week (4 x 30).
Important: Don’t forget absences (ex. Vacation) and continuous, non-project work.
Tip: Capacity calculations are the basis for realistic project planning. They show how much can actually be done before tasks are assigned.
Capacity Planning with Meisterplan
Meisterplan is one of the few tools on the market that allows you to effectively manage portfolio capacity and easily provide data for strategic portfolio planning.
With Meisterplan, it’s easy to plan projectsProjectA project is a time-limited undertaking with defined objectives and resources that delivers unique results and often includes complex tasks. medium term for months in advance – based on existing role or resourceResourceResources are all the people, places and things that you need to complete projects. The most important resource? Employees, of course! capacities. Here, you can see and coordinate the projects in your entire portfolio according to the available resources. Additionally, you can use what-if scenarios to establish a truly realistic portfolio.
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