What is Resource Forecasting? An Ultimate Guide for Project Managers

- By Mahendra Gupta | March 22, 2024
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In today’s competitive market realities, numerous organizations still depend on legacy and outdated tools for planning, forecasting, and managing their resources. However, relying on approximation and guesswork in the absence of proper tools and techniques is no longer viable or sustainable.

Companies need accurate estimations for timely decision-making and future-proofing the workforce against market volatility.

It helps managers answer questions like:

  • Do I have sufficient capacity and skill sets to take on additional projects?
  • What should I do with the excess capacity without sufficient work to engage them?
  • How can I stay within the budget with the available resource mix?

A robust resource forecasting model can answer these queries and help businesses stay ahead of the curve. In addition, it provides actionable insights for improving profitability by maximizing billable resource utilization.

In this guide, we will learn the critical aspects of resource forecasting in project management.

Let us begin with the basics.

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What is resource forecasting in project management?

Resource forecasting predicts various project resource metrics over a specific period, such as demand, supply, project vacancy, on-the-bench, and project resourcing costs in advance. Accordingly, it provides early warnings that help businesses be proactive and implement preventive measures to avoid resource-related roadblocks in the project.

What is an example of resource forecasting?

Resource forecasting is a step-by-step process project managers can implement to estimate and allocate resources effectively.

Let’s consider an example of resource forecasting in project management:

Suppose a project manager has an upcoming project for website development and design. The project has a defined timeline of six months, and the resources involved are developers, testers, UI/UX designers, analysts, etc. The company wants to accurately forecast and allocate resources to ensure smooth project execution.

The first step in resource forecasting is to clearly define the project requirements. This includes understanding the project’s scope, objectives, deliverables, and timeline. Next, the project manager and the team members identify all the tasks and activities required to complete the project.

Based on the identified tasks and activities, the project manager assesses the resource requirements for each phase of the project. Using appropriate forecasting tools, managers determine the number of developers, testers, UI/UX designers, and analysts required in each phase and predict any shortages or excesses.

By following these steps, the company can effectively forecast and allocate resources for its website development and design project. This ensures they have the right resources in the right place at the right time, leading to improved project outcomes and successful delivery.

Knowing the definition, let’s understand the significance of resource forecasting on the smooth progress of projects.

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Why is resource forecasting important in project management?

Resource forecasting is an essential function of the resource management process. Before projects kick off, it ensures they are suitably staffed and equipped to respond to unforeseen circumstances during the entire lifecycle. It also estimates the workload, skill requirements, and project financials, enabling organizations to achieve profitable resource utilization.

This is how resource forecasting is essential for project managers. Now, let’s know the key benefits of resource forecasting.

What are the advantages of resource forecasting?

The significance of efficient resource forecasting in project management is profound. It facilitates effective resource allocation and leads to the success of projects. Here are some of the critical benefits of resource forecasting in project management:

Reduces project cost significantly across the organization

Deloitte Global Cost Survey reveals, “Cost reduction is the most significant initiative for any business.”

Resource costs represent a substantial portion of businesses’ expenses. The most effective method to manage these costs is to leverage an advanced forecasting tool to anticipate future resource needs in advance.

This provides managers enough lead time to implement essential resourcing strategies for cultivating an optimal resource pool. Consequently, it eliminates the need for last-minute firefighting to secure competent resources or resorting to expensive hiring/firing cycles.

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

Maximizes resource utilization for billable and strategic work

Resource utilization is one of the most crucial KPIs of resource management. However, engaging all the resources in various activities doesn’t ensure profitability, as they could be working on non-billable or mundane BAU tasks.

Forecasting enables you to gain foresight into non-billable, billable, and strategic work ahead of time. This allows resource managers to improve profitability by periodically mobilizing resources from non-billable to billable and strategic projects. It also helps eliminate under and overutilization of resources.

Enables effective management of pipeline projects

Lack of visibility into the sales pipeline results in the eleventh-hour scuffling for competent resources. Resource forecasting helps plan for the potential project demands in the opportunity or approval sales pipeline.

Further, it assists in resource capacity planning to avoid last-minute hiring and project delays. Resource forecasting also reduces unwanted cost escalation by making the right hiring decisions ahead with sufficient lead time.

Read more: 4 steps to perfect your Project Pipeline Management Strategy

Controls excesses/shortages of resources

An efficient resource forecasting tool enables you to perform multidimensional capacity vs. demand analysis based on role, department, team, location, skills, etc. It helps identify short and long-term resource excesses or shortages and proactively bridge the capacity gap.

Resource shortages can be controlled by providing training and hiring a permanent or contingent workforce. On the other hand, bringing forward project timelines or selling excess capacity mitigates the problem of excesses. Resource forecasting also minimizes bench time by providing training or shadowing opportunities.

Manages project financials to stay ahead of the curve

Periodically monitoring critical financial indicators such as cost, overheads, revenue, and profit margins ensures the project budget is on track. In addition, you can control project resource costs in advance by comparing the actual spending against the estimated budget.

Forecasting project financials also helps you to improve future estimations and align them to reality. In addition, it tracks shared resources working on multiple projects to adjust the resource mix for increasing revenue.

Reduces benched time of resources

Resource forecasting enables managers to anticipate when project resources will end up on the bench after a specific date. It helps minimize bench time by proactively looking for appropriate tasks before resources are rolled off from projects.

By forecasting project vacancies, benched resources can be assigned to suitable tasks. If there are no suitable projects, managers can facilitate training or shadowing opportunities for benched resources to assign them to projects quickly and improve billability.

Now that the benefits of resource forecasting are clear, let’s understand the challenges in predicting resource needs.

Challenges in resource forecasting

Market volatility and sudden changes in project demand can cause an imbalance in the project plan. Without proper resource forecasting tools, firms are caught off-guard in the event of sudden surprises. Let’s look at some of the problems faced by many organizations in project resource forecasting:

Incorrect forecasting due to lack of appropriate tools

Many organizations are still using legacy tools and home-grown solutions for resource forecasting. In addition, using multiple spreadsheets by different individuals requires reconciliation, causing a high chance of human error.

Spreadsheets also fail to provide complete visibility of various resource demands for the project and non-project activities. It cannot forecast workload estimates, forcing you to resort to unplanned hiring and firing cycles that adversely impact the bottom line.

Unable to forecast enterprise-wide demand vs. capacity

Using legacy tools in resource forecasting prohibits the visibility of existing resource capacity across the enterprise. In addition, the lack of foresight into future project needs also breaks the resource demand planning process.

Subsequently, resource managers cannot forecast resource excesses or shortfalls and apply appropriate treatments in advance to bridge the gap. The inability to predict project vacancies and the resources landing on the bench leads to the wastage of excess capacity. This results in costly hiring/ firing cycles that impact the bottom line.

Inadequate foresight into billable and strategic utilization

To maintain profitability, businesses must ensure that resources are utilized on billable or strategic work. However, resource managers fail to predict team members’ utilization across the enterprise without a proper resource forecasting tool.

Consequently, resource managers cannot mobilize resources from non-billable to billable and strategic work. Lack of foresight may cause over or underutilization of resources, resulting in burnout, unplanned attrition, and compromised quality.

Read more: Maximize Profitable Resource Utilization with Modern Resource Management Solution

Not able to predict and forward plan pipeline project

Two critical parameters mark a project’s success; timely delivery and being within budget. However, without clear foresight into pipeline project demands, resource managers cannot plan project activities ahead of time. It puts projects at risk with delivery delays and cost escalations.

Moreover, when managers cannot foresee future project resourcing needs, it leads to last-minute hiring activities compromising resource quality. If there is a demand for niche skills to start a project, hiring the same at the eleventh hour becomes challenging without the visibility of pipeline projects.

Estimation for project financial going off-target

Without a forecasting tool, managers may lack insight into factors such as changes in project scope, resource availability, market conditions, regulatory changes, etc. This can make it challenging to predict and control project costs effectively.

Moreover, relying on incomplete or outdated data during the planning phase may result in unreliable cost projections. These values may deviate significantly from the project’s actual financial outcomes and lead to financial risks.

Having listed the significant challenges, let’s learn the factors impacting resource forecasting in project management.

Factors that affect resource forecasting in project management

Resource forecasting depends on several factors, including market dynamics, evolving client demands, etc. In this section, we mention a few of them:

Complexity of matrix structure

In matrix organizations, employees work closely with people across other functions and business units, report to multiple managers, etc. With employees working on various projects or tasks, it can be challenging to gather accurate information regarding their present and future schedules, workforce capacity, project vacancies, etc.

Further, managers struggle to set appropriate milestones, identify potential bottlenecks, and develop contingency plans to address them proactively. Consequently, these can cause operational inefficiencies and compromise the success of the entire project.

Read more:What is Matrix Management and Why is it Important?

Resourcing strategy and market condition

Generally, one uses contingent resources for short-term assignments and goes for full-time employees for critical positions or longer-duration projects. However, such a resourcing strategy has its own set of challenges.

The contingent resources’ quality cannot be guaranteed, and permanent employees leave the organization for better prospects. Resources with in-demand skills are more vulnerable to leaving the organization. The attrition rate could also be high in specific locations, which needs to be analyzed and factored in while forecasting demand for resources.

Keeping up with emerging technologies

It is required to forecast both future and current resource demands for sustainability. Of late, there has been an explosion of new IT skills such as IoT, ML & AI, Blockchain, Big Data, and more.

As a result, many existing technologies will be obsolete, and the current workforce needs to pick up new skills to stay relevant. Therefore, it is necessary to analyze future projects’ skill requirements as a part of the forecasting process and plan accordingly.

Client and resource requirements

Managers must engage in open dialogue to gather information about the client’s goals, objectives, and expectations for the project. This may involve discussing deliverables, project scope, timeline, budget constraints, and any specific requirements or preferences the client may have.

Thus, based on this assessment, managers will determine the resource requirements in terms of type, quantity, quality, etc. Consequently, they will look into the talent pool to ascertain if the requisite resources will be available when required to prevent project delays or bottlenecks.

Sudden ramp-up / ramp-down of resources

Frequent ramp-up and ramp-down of resources within a project can affect the resource planning process. Sometimes, urgent project demands may arise with a short lead time. In such scenarios, managers can forecast last-minute project requirements and leverage freelancers, an on-demand workforce, or benched resources to fulfill demands.

Similarly, during ramp-down activities, managers can proactively identify when resources will be rolled off from projects and allocate them to appropriate billable or strategic work to reduce the bench size. This will ensure overall resource productivity, enhance project efficiency, and contribute to the firm’s profitability.

Read more: How to Balance Ramp-Ups and Ramp-Downs in a Project?

Estimating project financials

Usually, there is a variance between the actual cost and the initial estimated budget. So, the project managers allow additional buffers while committing to the project end date and its approximate cost.

Excess buffers will make the proposal uncompetitive, while the project risk increases with less buffer. So, deciding on an appropriate buffer size is essential in forecasting financials. It also influences the resource requirements for future projects.

Resource movement across locations

Some key resources are often required to work at the client’s site for an extended period to complete a successful project. In addition, the movement of resources between locations can be affected by administrative delays, resulting in client dissatisfaction.

Hiring additional resources at the client’s location becomes necessary in that situation. It will ensure no disruption in project delivery and must be factored into the resource planning and forecasting process.

Read more: The Art of Resource Planning Across Multiple Projects

Once you’re clear about the factors that affect resource forecasting, here are some essential tips.

Tips for perfecting resource forecasting in project management

Whether a project manager is initiating a new project or joining one already in progress, understanding, and forecasting resource requirements is crucial for successful execution. Here are some of the tips on how to effectively forecast resources in project management:

Know the strengths and weaknesses of resources within your project

Resource managers must evaluate the strengths and weaknesses of each team member before assigning them tasks. This involves reviewing their past performance based on output quality, skill level, and ability to deliver on time, which is essential for successful delivery. If a resource lacks the necessary proficiency to undertake projects, managers can initiate timely upskilling programs or hire suitable professionals to create an optimal talent pool.

Understand the skill requirements for your project to complete delivery

Project managers must thoroughly understand the skill sets required to deliver the project within time and budget. By meticulously breaking down the project deliverables at a granular level, managers can precisely determine the skills needed to complete each task. Consequently, the resource manager can initiate necessary resourcing measures to ensure the right resources are available for seamless project initiation and progress.

Read more: Resource Allocation: A Guide on How to Apply it to Project Management

Analyze lessons learned from the success and failure of past deliverables

Managers must consistently capture lessons learned throughout a project’s lifecycle. This helps firms prepare and refine their project management processes and learn from project failures as well as their successes. Analyzing past setbacks gives managers valuable insight into navigating future challenges. Likewise, leveraging successful project outcomes allows organizations to implement improved processes to complete present and future work successfully.

Build a direct communication channel with all the stakeholders

Establishing transparent and direct communication with all stakeholders facilitates accurate forecasting. When a client communicates about a future project, the delivery team can begin preparations accordingly. Likewise, when internal stakeholders share cost-reduction strategies, project managers can proactively substitute high-cost resources with more economical alternatives. This will allow organizations to provide value-centric services as per client expectations.

Take a complete stock of new requirements and the work that is getting finished

For better project outcomes, resource managers should evaluate both incoming project requirements and tasks nearing completion. This evaluation helps forecast and deploy rolled-off resources to new projects, ensuring they are engaged in revenue-generating activities. Furthermore, individuals lacking the necessary skills for new assignments can be trained or provided shadowing opportunities in advance to maintain billability.

Perform demand capacity planning for resources to identify gaps

Identifying the shortages or excesses of resources is a prerequisite in planning pipeline project needs. Equipped with robust capacity planning capabilities, resource managers can assess the gap between the existing capacity and demand. This enables firms to initiate resourcing treatments like hiring, training, or selling excess capacity to ensure they have the necessary resources to ensure timely project initiation well in advance.

Plan to acquire or release resources as per delivery commitments in advance

During project management, there will be instances where resources are either acquired or released per delivery commitments. It is imperative for resource managers to have a contingency plan in place to promptly fill vacant positions and ensure the billability of reassigned resources. Additionally, such reallocations present an opportunity to release some under-performers when their assignments conclude.

These are a few of the best tips for resource forecasting. Now, let’s discuss how resource forecasting can help manage remote workers.

Remote work and resource forecasting

Remote working has become a new norm with the outbreak of COVID-19, and many organizations have adopted this practice. It has become very convenient for the employees as most of their regular work, including meetings, can be done from their comfort zones. Some of the benefits are:-

  • Businesses do not need to invest in expensive office space
  • Employees will save on commuting time
  • It will be possible to attract talent from multiple locations
  • Part-time workers will be able to balance their other responsibilities better
  • Significant reduction in administrative and operational costs and more

Being away from the office introduces new challenges in tracking down information and disrupting the natural way of carrying out regular activities. It possesses three primary challenges for businesses:

  • How do I ensure that the employees are fully productive?
  • How do I monitor and track their performance remotely?
  • How do I attract cost-effective resources for my organization?

An efficient resource forecasting software can manage regular and remote workers, including contractors and freelancers. It combines resourcing forecasts for current and pipeline projects in a single Gantt chart view. This way, one can analyze if there is any shortfall or bottleneck and take proactive action accordingly. The activities and deliverables of the resources can be tracked using integrated software instead of micro-managing the workforce. It will ensure the productivity of remote teams.

Some intelligent resource forecasting solutions also allow one to simulate several scenarios and apply the best possible option in case of a resource crunch. However, many organizations still use spreadsheets or home-grown applications for resource forecasting, and they will find it difficult to manage remote workers.

Significantly, few companies provided the WFH option to their employees earlier. However, the current environment has forced businesses to explore remote work for business continuity. They have already reaped this benefit, and it seems this practice will continue even after the situation becomes normal.

A new business model may opt for a smaller working space and ask employees to visit the office rotationally. Therefore, investing in integrated resource forecasting software to manage remote workers makes more sense.

Read more: 7 Effective Ways to Boost Remote Team Collaboration

This is how efficient resource forecasting software can help businesses manage remote teams.

What are the forecasting techniques in project management?

Several techniques are available for forecasting the workforce, and one must use them judiciously. Listed below are some of the methods for forecasting human resources for an organization:

Delphi technique

It is based on the principle that forecasts (or decisions) from a structured group of individuals are more accurate than those from an unstructured group. Therefore, a panel of relevant people or SMEs is chosen to make forecasting decisions for the entire organization.

Nominal technique

A nominal group is formed with members having minimal interaction before deciding. First, selected participants are presented with a problem and asked to write their ideas anonymously. A designated facilitator manages this process in a structured manner and collates all the suggestions. Finally, the group analyzes each suggestion and collectively decides.


Brainstorming is a creative forecasting technique where one finds a solution to a specific problem by capturing a list of ideas spontaneously contributed by a group. Its success depends on each member’s capacity and willingness to listen, think out of the box, and feel free to express themselves. One may need a moderator for the success of this approach.

Trend analysis

Trend analysis studies past employment resource requirement patterns to predict future needs. The purpose is to identify trends that might continue. For example, an annual support maintenance contract will likely be renewed with the same terms and conditions. However, it can only provide an initial estimate.

Time series

It involves decomposing historical series into its components: trend, seasonal, cyclical, and random variances. When the various parts of a time series are separated, the subject under study can be known over the period, and projections can be made accordingly.

Ratio analysis

Ratio Analysis is a forecasting technique for determining resource requirements using ratios between any causal factor and the number of employees. It assumes that productivity does not change and the number of people required is directly proportional to parameters such as sales volume. It works better in a shop-floor environment.

Scatter plot

It is a graphical technique that helps identify the relationship between two variables. Managerial judgment plays a significant role here. If one can forecast the level of business activity, it will be possible to estimate resource requirements. It is similar to the ratio analysis but more visual.

These are some of the forecasting techniques that help managers in effective project resource management.


Forecasting defines the probability of the happening of future events. The manager must consider all possible outcomes since resource planning is based on future demand. Therefore, forecasting is a critical element in the planning process. Every decision within an organization is based on forecasting and taking appropriate risks.

Businesses can choose to use any of the above forecasting techniques and customize them as per their working model. Though forecasting cannot check future happenings, it provides clues with a certain probability for the next action course. Good resource forecasting can be a business game changer and significantly improve the profitability of an organization.

The Glossary

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

The Saviom Solution

SAVIOM has over 20 years of experience helping multinational clients manage their resources efficiently and effectively. With over 20 years of experience, this Australian-based MNC has a global presence across 50 countries and has helped 100+ clients meet their specific business goals. Saviom also provides tools for project portfolio management, professional service automation, and workforce planning software. So, SAVIOM can help your business establish an efficient system for your business challenges.

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