What is capacity planning?

Advantages of capacity planning and how to implement

What is capacity planning?

Capacity planning is one of the pillars of great construction resource management. Ensuring you have enough people for your projects at any given time can be the difference between turning a profit and finding projects suddenly at risk. It’s no easy task to juggle your entire workforce while being mindful of your timeline.

In its simplest form, capacity planning for construction (or ‘workforce juggling’) is the process of determining the production capacity needed by a general contractor to meet the changing demands of its projects. Capacity, in this case, refers to your workforce.

As a general contractor, this means working with the schedules of your project management team and subcontractor, along with material delivery and forecasts. The more accurate and up-to-date your communication is with your teams and vendors, the more effective your capacity planning can be. The result will be a more realistic and accurate project completion timeline. 

So if you’re wondering, ‘What is capacity planning?’ and the different types commonly utilized throughout construction projects, keep reading this article for answers to your burning questions.

What is capacity planning?

Capacity planning is the process of forecasting future demand for a product or service and ensuring that the necessary resources are available to meet that demand. 

Typically, construction resource management is done long-term, looking at least a year ahead. However, it’s also important to routinely review capacity plans to ensure they’re still accurate and relevant. 

The purpose of capacity planning is to avoid underutilization and overutilization of resources, leading to inefficient operations and high costs. By carefully planning for future demand, businesses can ensure they have the right capacity to meet customer needs without incurring unnecessary expenses.

Capacity planning is a critical part of operations management, as it helps to ensure that businesses can meet customer demands in a timely and efficient manner. Without adequate capacity, businesses may find themselves falling behind competitors or struggling to keep up with customer demand.

As a part of project management, capacity planning is the key to ensuring that a company has the resources it needs to meet demand. By accurately predicting future demand and implementing the necessary measures to maintain adequate capacity, businesses can avoid disruptions in production and minimize associated costs. 

Workforce capacity planning helps businesses optimize their use of resources by ensuring they have the right amount of workers, equipment, and materials to meet both current and future demand.


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Types of capacity planning

Project management capacity planning is an advanced process that ensures organizations can receive, contain, or deliver their products. With ‘what is capacity planning’ explained, let’s go over the types that are commonly used in construction projects.

Workforce capacity planning

Workforce planning is the process of determining what your organization needs in order to accomplish its goals and objectives. This includes understanding current staff levels and identifying future workforce requirements (the gap between those you have available versus what’s needed), then implementing solutions so that everything runs smoothly. 

The goal of workforce capacity planning is to ensure that an organization has the right mix of employees with the right skill sets to meet current and future needs. To do this, organizations need to first assess their existing workforce and identify any gaps in the skills needed. Then, they must develop a plan to either train existing employees to close those gaps or hire new ones. 

Tool capacity planning

Not having enough tools and equipment to keep up with demand will slow production and increase costs. On the flip side, investing in more tools than needed can waste resources.

To plan tool capacity, the first step is to understand the demand for the product or service being produced. This includes both the current level of demand and any projected future changes. Once demand is known, it then becomes possible to assess the capacity of existing tools and identify any potential bottlenecks. If necessary, steps can then be taken to increase capacity, such as upgrading machines or adding new ones.

Taking the time to plan tool capacity carefully helps avoid production problems, keeping costs under control.

Product capacity planning

Product capacity planning is an essential part of the production process, as it ensures you have enough raw materials at all times for task completion. Raw material management should be done on multiple levels for product variants and subassemblies, which require more than one type or grade per component.

The difference between capacity planning and resource planning

Capacity planning ensures you have the right amount of resources available to meet demand. Resource planning, on the other hand, helps divide these resources into separate projects, helping managers plan allocations.

While capacity planning involves forecasting future demand and then designing processes and infrastructure to accommodate them, resource planning ensures that you’re using your resources efficiently. This may involve things like optimizing processes.

Why is capacity planning so important for construction resource management?

Perhaps the most important reason that capacity planning is so important for construction resource management is that it helps ensure that projects are completed on time and within budget. By carefully planning the amount of work that needs to be done, construction managers can avoid overloading their teams and prevent bottlenecks from forming.

It also allows construction managers better forecast future staffing needs. Understanding how much work will need to be done in the future makes sure they have the right number of employees working on each project. This lets you avoid having too many workers sitting idle during slow periods or being overwhelmed during busy times.

Capacity planning is also important because it helps construction managers to optimize their use of resources. They can identify areas where they can save money by using fewer resources. For example, if a construction project requires a large amount of manpower, but only a small amount of materials, the manager may be able to reduce the number of workers on the project without sacrificing quality.

For more information about resource planning, visit our guide to construction resource allocations.

The advantages of capacity planning

Here are the main advantages of project management capacity planning.

Reduced costs

By taking into account future demand, capacity planning can help avoid the costly over-production of goods or services. By matching capacity to demand, businesses can ensure that they’re using their resources efficiently and not incurring unnecessary costs. 

Project management capacity planning can also help to optimize the use of labor, machinery, and other resources, minimizing the need for overtime or paying for idle capacity. Additionally, by understanding the company’s production capacity, businesses can better forecast their future cash flow needs and manage their working capital more effectively.

Avoiding inventory and labor shortage

Capacity planning can have a number of advantages for an organization, including avoiding inventory and labor shortages. By having a well-developed capacity plan in place, an organization can more effectively manage its resources and ensure that it meets customer demand in a timely manner.

Capacity planning can also reduce costs by ensuring that an organization is not overproducing or underproducing its products. For example, if demand is expected to increase, capacity planning can help avoid renting additional space or hiring new employees. 

Easier resource management

Businesses can avoid the cost and disruptions associated with overloading their resources by having a solid capacity plan. Capacity planning can also help businesses better utilize their resources by ensuring they have the right mix of capabilities to meet expected demand.

As a result, businesses that make use of workforce capacity planning are better able to manage their resources and avoid potential problems associated with inadequate or excess capacity.

Sustainable growth 

Capacity planning allows businesses to avoid the risks associated with growth, such as losing existing customers or not taking on new business opportunities due to a lack of resources. 

By ensuring that they have the capacity to meet future demand, businesses can plan for sustainable growth. It also helps with finding ways to improve efficiency, leading to lower costs and increased profitability.

Improved skill management and recruitment

By looking at current and future workloads, employee skills, and development plans, organizations can better match workers to tasks, ensuring that the right people are in the proper roles. 

Organizations that engage in capacity planning are better at identifying skills gaps and then taking steps to close them. This may involve training current employees or recruiting new talent from outside the organization. 

A clear understanding of skills helps organizations be more strategic in their approach to human resource management. In addition, capacity planning can improve retention rates by ensuring that employees remain engaged in their work.

What to consider when capacity planning

Workforce planning software and construction resource management tools can help collect and analyze important information in real-time, whether it’s bid tracking conversions, project and budget management, employee management, and communications. 

Software like Bridgit Bench that’s built exclusively for the construction industry can play a major role in capacity planning, and while you don’t need software to manage your capacity, it can certainly help to simplify what may normally be a complex process. For more information about resource management, check out our guide to construction resource management.

Regardless, when it comes to tackling capacity planning, you should first hone in on forecasting capacity. Involve your sales team to figure out the most realistic forecast for upcoming projects to meet demand. 

Try to get as accurate an estimate as possible around the likelihood of winning each bid and when the project will be awarded. You’ll need an understanding of which bids you’re most likely going to win and when those projects will need to happen.

Once you have a realistic forecast, you can begin to overlay your forecasted projects with your existing workforce plan. Managing your growth to avoid risk will require you to analyze the current situation and compare it outward. This may mean a month or two into the future and, depending on your specific organization, up to a year out for some team members.

Now you can begin to identify gaps and create an accurate plan that includes a long-term strategy for acquiring needed resources. For your workforce, it’s simple: you can hire new team members with the required skill sets or train them up to the needed skill sets. 

Hiring can be costly, whereas training can be time-consuming, but it also allows you to tailor training to meet your specific needs and standards. You should also have subcontractor and vendor evaluation processes in place to find and approve new ones in case your current subs are too busy, or vendors can’t meet your supply demands.

Consider tasking someone in your operations team with the responsibility of monitoring your capacity planning model and providing regular reports during your workforce meetings. They can inform everyone about any upcoming gaps and make it easier to identify when to take action to acquire needed resources to manage growth.

Once you have a consistent understanding of what resources you need to complete forecasted projects, you’ll be able to make informed decisions that suit your company’s current situation and future needs.

Here are some specifics in tackling capacity planning.

Take a look into your future 

This responsibility will include your operations, sales, and marketing teams. Sales and marketing are responsible for filling the project pipeline, which can be very difficult to forecast. Operations teams, without tools that have accurate oversight, will sometimes wind up basing their project forecasting on gut instinct.

Forecasting for construction resource management should be a more detailed process than simply relying on gut feel. Your sales team should be included in your capacity planning and providing them with training to better understand the process can be greatly beneficial.

Take a look at your workforce plan

It’s no surprise that your current workforce will play a major role in your capacity planning. You should have an understanding of how much work your team is capable of handling. 

Construction resource management tools can help track how your team members are performing so you can better understand their capacity. It’s likely that some of your team can handle more work than others, but by providing the right tools and training, you can increase the capacity of your entire team.

Your project managers will often also have a good understanding of labor requirements and availability, so including them in your capacity planning should be a priority. They can provide valuable input and identify potential issues with vendors, materials, and labor. They can also offer input on variables that can’t be controlled, like how the weather will impact certain project schedules.

Decide on your capacity strategy

There are a few different strategies that your organization can use when planning, but one important decision regarding strategy will be whether you want your capacity planning to be proactive or reactive.

There are three methodologies behind capacity planning, referred to as the lag, lead, and match strategies. To choose the best method, you should consider the type of business you operate, risk levels, and the life cycle your project is in.

The lag strategy sees planning in order to have a sufficient number of resources available to meet present demand. The lead strategy, meanwhile, is used to forecast the demand. The match strategy is not unlike a combination of the former two strategies. It gives the opportunity to control the balance between true demand, projected demand, and market trends. 

If you’re able to stay ahead of any short-term labor shortages, you can maintain or improve your company’s reputation, relationships with stakeholders, and ability to complete projects on time. 

Adversely, you can invest in recruitment that you may not need, but it will cost money. Adding new team members as needed is a great way to ensure you’re only paying to acquire whatever workforce you need.

Conclusion

We hope this article has sufficiently answered the questions of ‘What is capacity planning?’, ‘Why is project management capacity planning important?’, and ‘What is the best option for workforce capacity planning software?’. Capacity planning that evolves and excels in time can help businesses significantly improve efficiency while avoiding costly outages.

To help, check out software solutions like Bridgit Bench. Bridgit Bench is a workforce capacity planning software that provides users with valuable insight, allowing you to customize your experience in tracking team member skill sets.


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Bridgit Bench will also identify potential allocation issues in your workforce plan and help monitor the capacity of full-time equivalent team members. For more information about workforce management and capacity planning, visit our blog.


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Michel Richer

Michel Richer is the Manager of Content and Communications at Bridgit. He started in the construction industry early on with a local restoration company. Michel is driven to propel the construction industry forward by helping to eliminate outdated, ineffective processes.

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