What is Resource Capacity Planning? An Ultimate Guide for Every Project Manager

- By Om Gupta | November 24, 2023
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Businesses are facing a highly competitive and volatile market demand across the globe. Since resource costs are among the most expensive entries in any organization’s balance sheet, businesses must utilize their scarce resources most efficiently for higher ROI.

Many organizations do not have a dedicated resource capacity planning tool. They have been carrying out the resource allocation and capacity planning process using their legacy systems, such as Excel spreadsheets/other home-grown applications. There are many resources, and no mechanism exists to link their work together to get enterprise-wide visibility for resources.

The Excel spreadsheets and half-baked home-grown capacity planning solutions are incredibly limiting, time-consuming, and hard to maintain. In fact, “88% of spreadsheets are difficult to maintain.” It cannot meet new business challenges.

Businesses are in desperate need of an enterprise-level futuristic resource capacity planning solution. This guide has been designed for businesses to understand enterprise resource demand and capacity planning in project management. In addition, it will help any company to establish the right processes with the tool.

But before delving into the details, let’s first understand the capacity planning definition.

What is resource capacity planning?

Resource capacity planning predicts the gap between future demand and workforce capacity to identify the shortfall/excesses of resources. Accordingly, one can develop a resource capacity plan to bridge the gap proactively for successful project delivery while ensuring every resource is optimally utilized. Thus, it becomes an essential step before resource allocation, providing all available resources before the project’s onset.

The resource capacity planning process requires centralizing information from various systems. These systems are human resources, skills, current projects, future pipeline projects, resource demand/ allocation, vacations, and non-project activities. It helps you build a single real-time system as a single source of truth.

Guide to Resource Capacity Planning

Role of resource capacity planning in project management

The resource capacity planning model plays a vital role in project management. It helps align sales and delivery by planning and forecasting pipeline opportunities. Once a pipeline project reaches a certain probability stage, the manager estimates the resource requirements and initiates the requisition process.

The corresponding resource manager then starts planning for fulfillment. But first, they need to analyze if there are sufficient resources to start the project.

The resource manager compares the existing resource capacity against the project demand from multiple perspectives such as role, department, team, skills, etc.

It helps to identify the shortages or excesses ahead of time. Accordingly, managers can apply appropriate resourcing strategies, such as hiring a permanent or contingent workforce, to bridge this gap.

Allowing sufficient lead time helps avoid last-minute hiring/firing costs and ensures that the right resources are available for projects at the right time and cost. Simultaneously, capacity resource planning helps minimize bench time proactively by facilitating on-the-job training, adjusting timelines, or selling excess capacity.

In a nutshell, resource or workforce capacity-based planning helps build an optimized project team, reduces project costs, and future-proofs the workforce against market volatilities and economic uncertainties.

What are the key elements of resource capacity planning?

Resource capacity planning involves determining and managing the availability and capacity of resources required for project execution. It ensures appropriate resources are allocated to tasks and projects based on availability and workload capacity. The key elements of resource capacity planning include:

Identifying and categorizing resources

Managers must have complete data on the available resources in the workplace. For this, they should first establish specific categorization criteria, such as role, skills, expertise, availability, cost, etc. Following that, they can then use these criteria to group their available talent pool into different resource categories required for various project activities. This category-based grouping provides an overview of the resources at the organization’s disposal, helps assess the resource capacity, determine bottlenecks, and evaluate gaps.

Estimating resource demand

Organizations must accurately forecast and estimate the resource demand to ensure successful completion of projects. To achieve this, they must evaluate project plans, scope, and timelines to determine the specific resources required for each project activity.These resources include skills and expertise, materials, equipment, etc. In addition, they must also identify the total resources or capacity required to complete the project on time. By thoroughly assessing these factors, organizations can align their resource allocation strategies effectively and optimize the utilization of available resources.

Assessing the resource capacity

Assessing resource capacity is a critical element of resource capacity planning, which involves evaluating the organization’s ability to meet demands and requirements for resources within a specified period. Here, once project managers determine the resource demand, managers analyze the existing workforce using availability or capacity vs. Demand reports. This step helps understand whether the organization has the right number of resources with the desired skills to meet ongoing and future demands.

Capacity vs. demand gap analysis

A capacity vs demand gap analysis is key to identifying the gaps between the resources needed for future projects and the ones available within an organization. This step is vital as it helps managers check for any imbalances in capacity and demand. It involves comparing the future resource demand with the available capacity to identify shortfalls or excesses. If there are any potential gaps, managers can take corrective measures to bridge them to ensure uninterrupted project execution and improve overall billability.

Now that we know the various components, let’s understand the importance of capacity planning for firms.

Read More: Beat Market Volatility With Efficient Resource Capacity Planning

What are the business benefits of resource capacity planning?

Resource capacity planning helps businesses plan pipeline projects and futureproof the workforce against ongoing market volatility. Here are some of the advantages of resource capacity planning for your business:

Reduces project resource costs across the enterprise

Capacity planning helps forecast the skill demand precisely and arrange the requisite personnel. It:

  • Reduces last-minute expensive hiring measures to fulfill sudden demands
  • Helps avoid unnecessary overhead costs and frequent hiring/firing cycles.
  • Allows for the allocation of resources to tasks based on the available capacity, preventing double booking, burnout, and unplanned attrition.
  • Eliminates under/over-skilled resources on projects
  • Utilizes cost-effective global resources without compromising quality
  • Minimizes hiring/firing cycles by aligning project workload with workforce capacity
  • Avoids double booking of resources and minimize burn rate
  • Controls unplanned attrition of resources

Read More: Reduce Resourcing Cost by 10-30% with Modern Resource Management Solution

Maximizes productive utilization of every resource

Billable resource utilization is a critical KPI for a professional service business to ensure profitability and sustainability. Capacity planning helps balance the availability of resources with the project demand to prevent under/overallocation to minimize idle time, billing losses, and work overload.

Additionally, it allows for forecasting billable and strategic utilization of the workforce ahead of time. Based on that, managers can mobilize employees from non-billable or low-priority work to billable or high-priority projects to tap into their maximum potential and enhance profitability.

Ensures competent resource allocation for successful project execution

Having the right-skilled employees available at the right costs is crucial for a project to finish within the budgeted time and cost. Capacity planning enables resource planning and management to identify and allocate competent resources to each project based on their skills, experience, qualifications, location, team, resource cost rate, and other defined criteria.

It, thus, helps implement the “best-visible-best-fit” instead of the “first-visible-first-fit” approach to distribute tasks evenly based on resources’ ability and capacity. It, therefore, prevents work overload, schedule overruns, and contributes to timely project completion.

Forecasts and bridges the skills gap

Capacity planning helps identify skill shortages or excess ahead of time and take several corrective actions to eliminate them. For example, managers can:

  • Readjust project start and end dates to align with the available capacity.
  • Hire a contingent workforce for short-term requirements
  • Retrain and upskill employees to prepare them for future projects.
  • Bring forward some initiatives to meet strategic goals in case resources are in excess to optimize bench size.
  • Mobilize resources across several departments to maximize utilization and increase profitability.

Aligns sales and delivery by forecasting pipeline opportunities

Capacity planning helps consider the forecasted and actual deals a company wins to estimate the resources ahead of time. It also allows the delivery team to coordinate with the sales team to evaluate and determine the feasibility of the sales pipeline opportunities based on the project’s resource requirements and the client’s expectations.

Accordingly, the delivery team can forward-plan and ensure the right resources are available at the right time to finish the project. It also helps prevent the ‘overcommit and underdeliver’ trap often arising from sales-delivery misalignment to ensure timely project initiation and enhance client satisfaction.

Once the benefits of resource capacity planning are clear, let’s move on to learn some of the best methods of resource capacity planning.

Best practices of resource capacity planning

Resource capacity planning in project management is becoming increasingly critical for a business to reduce resourcing costs and become responsive to the market. As a result, resource capacity planning has gone beyond the basics of measuring workforce demand against capacity.

Here are some key strategies to implement capacity planning efficiently in your firm

Forecast capacity vs. demand and form a project resource plan in advance

A business must forecast capacity vs. demand from multiple dimensions, i.e., by role, department, team, location, skills, etc. It helps identify short- or long-term shortages/excess of resources. This enables the managers to implement the right resourcing treatments to bridge the gap.

For instance, in case of shortages, organizations can facilitate re-training/upskilling resources, or hiring a permanent/contingent workforce to avoid last-minute hiring/firing costs. Conversely, when the resources are in excess, managers can either bring forward project timeline or sell extra capacity to optimize resource utilization and ensure successful project delivery.

Track and analyze the competency matrix in real-time

Tracking and keeping up-to-date information about the workforce competencies and skills is critical. It allows the right resource with skill, experience, qualifications, individual preferences, etc., to be allocated to the proper work.

It helps plan a new project that may need a niche skill that is difficult to get from the market. If such a capability is available within the organization, the resource can be outrotated with a suitable backfill candidate. It, thus, helps initiate the new high-priority project on time without disrupting the ongoing one.

Manage project pipeline efficiently

The system should keep track of future potential projects in the pipeline and forecast estimated resource demand. It will ensure the resource pool is optimally balanced, skilled, and ready to meet the demands of new projects.

Managers can decide whether to re-skill, hire, or have contingency resources to do the work. They can also assess the pipeline project demands to determine whether they are one-off or recurring to create an optimal mix of permanent and contingent resources and overcome budget constraints.

Read More: Project Resource Management: An Ultimate Guide on How to Master it

Predict and improve overall resource utilization

The system should provide short- or long-term billable, strategic, and overall utilization forecasting. If resources are underutilized, managers can bring forward some project timelines or sell excess capacity to optimize their utilization.

If resources are overutilized, they can adjust projects’ timelines to match the future availability, pull in additional team members, or initiate a planned or project-specific hiring as required. This way, managers can take proactive measures to ensure optimal utilization levels of the workforce.

Foresee project vacancies and people on the bench

Failure to find the right resources for the right project can cause you to lose an opportunity. Therefore, the system should give you foresight into future resource needs and people who will end up on the bench.

It helps resource managers mix and match available people against project vacancies to avoid increased idle time and billing losses as repercussions. Not just that, robust capacity planning measures also help ensure all the projects are staffed with the right-skilled resources and ensure their successful execution.

Streamline resource requisition to deliver projects on time

Conventionally, resource requisition and allocations are done through email or phone requests that cause chaos. The reason is that it leads to silos of information regarding resource requests and allocations across various projects. Therefore, a resource may be booked for multiple projects beyond their capacity.

It can cause not only burnout but also power conflicts among project managers for similar-skilled resources. Therefore, streamlining the process using workflow is critical to ensure resources are allocated with appropriate approvals and notifications. In addition, one must avoid unnecessary emails/telephone calls as they cannot be easily reconciled, documented, and analyzed later.

Read More: Resource Forecasting Guide for Project Managers

These are some effective strategies businesses can adopt for resource capacity planning. Let’s look into the effect of resource capacity planning on utilization.

How does resource capacity planning affect utilization?

Achieving high utilization rates relies on the efficient movement of team members across tasks and projects, minimizing unnecessary downtime. Successful resource capacity planning is vital in aligning resources, their skills, and project demands. By implementing effective resource capacity planning, companies can experience increased utilization rates that remain strong over time.

Additionally, it is also crucial to continually implement capacity planning strategies, learn from past projects, and build a comprehensive catalog of employee skills. This continuous improvement approach enhances planning and resource allocation, resulting in a positive impact on utilization rates. Ultimately, the goal is to reach a utilization percentage that maintains profitability while avoiding employee burnout.

Knowing how resource capacity planning impacts utilization, let’s understand how to select the right solution for effective capacity planning.

How to choose the right solution for efficient resource capacity planning?

Capacity and resource planning is a crucial part of the performance improvement of modern business. It is critical to look for a solution beyond the current spreadsheet functionalities. A business should ensure that they have robust capacity planning software that can provide the following:

The system should be scalable, configurable, and expandable

Every business is different, and so are its workforce capacity planning needs. Therefore, a business must select a scalable and configurable capacity planning tool to meet current needs and expandable to meet future business requirements. In addition, system performance must not degrade with more users using the device across the organization.

It should forecast profitability and productivity

Resource capacity planning methodology should help your business to do multi-dimensional forecasting. It will provide real-time business intelligence to improve business performance, profitability, and productivity.

It must solve the complexities of matrix organization

It must align with the matrix organization structure. Nowadays, most businesses have established a matrix organization structure to best utilize their resources. So, companies must have a capacity planning tool that aligns with matrix organization structure and associated complexities.

The solution must provide real-time BI analytics

Project demand in a real-life business environment changes every minute. So, it is crucial for resource management and capacity planning techniques to get real-time business intelligence, i.e., reports, analytics, and dashboards.

It should integrate with other applications

Most businesses have already invested in enterprise-level systems. They hold a lot of data required by a capacity planning solution, i.e., resource profile, competencies, project detail, etc. So, the resource management system must integrate seamlessly with existing applications.

Read More: How to Select the Best Resource Management Solution for your Business

In this way, organizations can choose the right capacity planning solution. So now, let’s know some ways to do resource capacity planning.

Checklist for resource capacity planning for a specific period

Here are some critical capacity planning strategies you must consider while managing capacity and demand for projects.

Forecast & calculate workforce capacity

  • Take an inventory of your organization’s full-time, part-time, contractor, or freelance resources.
  • Include resources who will be joining or leaving during this period
  • Assign calendar (Workweek and Holiday list) to your resources if they are working at different locations
  • Track the skills and competencies of the selected resources

Establish project portfolio

  • List all the current and future projects
  • List all the potential opportunities which are in the pipeline
  • Account for non-project activities like BAU, Support Maintenance, Administrative Work, Training, etc.
  • Categorize the projects into Billable, Strategic, and Non-Billable Projects
  • Prioritize your projects for a better Capacity Planning process

Read More: A Quick Guide to Product Portfolio Management

Forecast resource demand

  • Get foresight into the resource requirements of the pipeline projects
  • Identify the competent resources and their availability during the same timeline
  • Prioritize the demand as per the criticality of each project and their subsequent tasks

Compare resource demand against capacity

  • Analyze Resource Capacity versus Demand
  • Identify the Gap between Resource Capacity and Demand
  • Identify skill shortages or excesses, if any.
  • Plan on how to bridge the gap of shortfall of resources ahead of time

Allocate resources to the appropriate projects

  • Assign the right resources to the right Project. Avoid allocating over-skilled or under-skilled resources
  • Allocate generic resources or placeholders on future Projects
  • Create estimates using placeholders for your Opportunities
  • Record resources unavailable time, i.e., People going on Leave, training, etc.
  • Implement the right resource optimization technique to avoid employee burnout

These are a few techniques to be considered for managing project capacity and demand.


Resource capacity planning is a crucial aspect of project resource management. By leveraging the functionalities of advanced capacity planning tools, businesses can use their resources more effectively. In addition, it also helps in reducing resourcing costs, eliminating reactive hiring, and futureproofing their workforce against market volatility.

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Read More: Glossary of Resource Workforce Planning, Scheduling and Management

The SAVIOM Solution

SAVIOM is the market leader in providing an Enterprise Resource Capacity Planning solution. With over 20 years of experience leading the market, Saviom is actively used by over 15 highly esteemed global companies worldwide. The tools within the suite include project portfolio management, professional service automation, and workforce planning software. Re-engineer operational efficiency with a system shaped around your business!

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