What is Capacity Management?

developers working in an office

It is no secret that capacity management is paramount for timely project delivery: it is your chance to develop a strong ground for your project to stand on. Here are the basics of capacity management you need to know for successful projects.

Capacity management definition

Capacity management is managing the available capacity to ensure that resources are used optimally. Simply put, businesses have a certain number of available hours from resources and the goal here is to maximize the value gained within the given limits.

Managing the available capacity by role is a great way to compare the available resources with the time needed by role for a specific project. Taking it a step further out, analyzing the capacity can give you an overview of the composition of the human capital in the company and whether there is a match with the actual needs.

Developing a capacity management plan and analyzing resource availability makes it easy for companies to see if they have enough people with relevant skills to cover the upcoming projects. The analysis helps project managers and directors of operations do effective decision-making in regards to hiring new people or halting certain projects. In short, capacity management refers to the demand and supply of resources. This means it answers the following questions:

  1. Do we have sufficient available resources to cover all projects?
  2. Do we have enough projects to supply all available resources with a reasonable workload?

It’s important to note, though, that there is a difference between capacity management and resource management. If you look at those in terms of timing, strategic capacity management comes first in project planning. The process usually starts with the stage where you look at whether there are sufficient resources to work on the project. Only after that can you focus on managing your resources in real time, assigning team members to specific projects, and allocating tasks.

Capacity management process

There are several steps you should take when managing your capacity:

Step 1: Calculating capacity. This is where you need to get a clear idea of the current resource capacity and see, to put it bluntly, how many available hours of what skills you'll have in the future. A utilization report is often used to understand if there are expected shortages of resource capacity in your company or not. Utilization will be at its peak if that's the case. Based on the received utilization rates, you can define a capacity management strategy and see if you have enough people to cover the upcoming projects. 

Step 2: Determining resource needs. Based on the scope of the project, you can see what resources you already have and what resources are still missing. You will have relevant data helping you explain why there is a need to hire new people for your teams. 

Step 3: Prioritizing what to work on. When hiring new people is not an option, you might need to do some smart project and task prioritization, somewhat reshuffling your current resources and making up for the missing capacity.

Capacity management: best practices

Although capacity management can be quite a challenge for any business, it’s easier to succeed if you try following some of these tried and tested methods:

  • Communication and transparency are crucial at every stage of project planning and execution so be sure to keep all the stakeholders, executives, and managers on the same page regarding your performance and capacity management.

  • Calculate potential risks that could undermine project capacity (like personal issues, government regulations, etc.), and think ahead about the ways to manage them.

  • Find advanced capacity management tools or capacity management software to help you accurately predict and tackle the possibility of not having enough resource capacity or having too much of it.

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