The 3 Capacity Planning Strategies Agencies Must Know
As an agency, it’s always good news when you get a new client. After all, more work means more profits, and it’s the primary way you grow your business. But do you have sufficient resources to handle the change? Is your existing capacity enough to meet the future demand for your products – and if not, how do you plan to navigate this problem?
For many business owners, day-to-day project management is hectic enough, without worrying about what may or may not happen next. But strategic capacity planning is a key part of maintaining stability within your company.
In this article, we’ll outline the three capacity planning strategies you can apply to your agency, and help you understand which one is right for your needs. Let’s get started!
What is capacity planning?
Capacity planning is the process of working out how much capacity is needed to meet the demands for your products or services. It helps you work out when to onboard new staff, when to reduce your workforce and allows you to allocate resources in your agency efficiently to meet demand.
The process typically involves working from predictions of market demand or your own sales forecast figures to estimate the optimal capacity ahead of time. It should take external factors into account, to give you an accurate idea of your capacity targets.
The benefits of capacity planning for your agency
Strategic planning is essential to an organization’s capacity management. Here’s why:
It improves project results
Having a carefully planned capacity strategy brings more precision to the deliverables of the project. When you have the right resources for the job, every step can be completed on time and by the person with the right skills.
On an internal level, capacity planning also helps improve transparency among team members, as they are more aware of their roles. This helps avoid setbacks and unplanned changes in the project execution. Long-term, this will reflect in your agency’s reliability and reputation.
It boosts employees’ morale
The process of capacity planning gives you a long-term view of your resources, which can change the way you make day-to-day decisions – for the better! Rather than encouraging staff to work outside their skill set to get a job done, you’ll know when you need to upskill, hire, and utilize different resources.
In this way, capacity planning helps with improved team utilization, which prevents burnout, boredom, and unrealistic expectations among your team. The result? Employees who are more skilled, productive, and engaged.
It is cost-effective
Not having a capacity plan presents some serious risks to your company. If your current capacity doesn’t provide enough resources for the future project, the project’s success – and your reputation – are at risk. Conversely, if you have too much capacity and not enough work coming in, that depletes your profits.
Effective capacity planning enables you to increase margins by being prepared for your future resource needs. This allows you to improve your resource management technique, optimize the actual capacity of each member of the team, and ensure you meet customer demand every time.
The 3 capacity planning strategies you should know
There are three types of capacity planning strategy you need to know as a project manager: lag, lead, and match. They differ depending on how far into the future you want to look, and each carry pros and cons.
Let’s look at the different capacity planning strategies in more detail.
Lag capacity planning involves increasing your capacity in reaction to an increase in demand. For example, imagine your digital marketing agency has a capacity of 10 graphic designers. When you have already booked all 10 and a new graphic design task comes in, you can hire an additional graphic designer to fill the gap.
This may be the most appropriate capacity planning strategy if you operate a stable business where resources are not often affected by unexpected demand. This type of strategic planning prevents excess inventory and resource wastage, such as idle employees, because it is based on actual demand increases.
However, the system is called lag because there is a lag between the demand arising and the resource being found. It may not be recommended for agencies with unpredictable demand forecasts, and it adds stress as you try to find quality talent at late notice.
Lead strategic planning is a more aggressive capacity planning approach than lag strategies, because it’s based on the potential of future demand.
To go back to our graphic design team, this might happen if you decide to start promising your clients a 24-hour turnaround on design projects. Noticing that your 10 graphic designers are sometimes booked up, you decide to add another five members to the team in anticipation of demand for your new service.
Taking a lead strategy approach to resource planning is focused on gaining an edge over market competitors since your organization already has additional capacity in anticipation of high demand. Your maximum capacity is high, and your production capabilities are ready to be employed. All you need now is the customers!
However, the risk with this workforce capacity planning strategy is that you have excess capacity sitting idle while waiting for demand to rise as forecasted.
Not only does this draw on your budget in the short term, but if the increased demand does not materialize, you may regret your decision to hire more staff.
The last of the three capacity planning strategies is the match strategy. This dynamic strategy involves steadily adding to your current production capacity to ‘match’ the demand that’s coming in.
Let’s use the same example of having 10 graphic designers on staff. As you start negotiating a new contract, you also start recruiting and onboarding one or two additional designers to meet the additional design capacity requirements. You’re ready for the consumer demand to surge, but you aren’t depleting your budget for the demand that hasn’t materialized.
The match strategy is the most used by organizations during capacity management because it is less risky than the lead strategy and has a more prepared resource capacity than the lag strategy.
By monitoring market trends, establishing an adjustment strategy, and keeping track of actual versus forecasted needs, your agency can meet anticipated demand while optimizing resource utilization.
Your agency is stronger with capacity planning!
Capacity planning is key to taking control of your agency’s productivity and efficiency. Capacity planning tools help you strategize with ease and clarity, so you can see how to use your available resources, and how and when to increase capacity. They allow you to identify and mitigate capacity constraints, improve supply chain and resource management, and fulfill deliverables within the scheduled timeframe and budget.
A strong and reliable capacity planning platform like Runn gives you a clear overview of your resources as well as granular details while providing you with accurate resource forecasts, team utilization reports, and capacity needs forecasting. With insights from the right tool, capacity planning decisions can be straightforward, and allow you to lead your team to maximum efficiency.