Capacity Planning for service organizations: The value of scaling your business

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When service organizations use a proven capacity planning process to meet demand with the least waste or increase their utilization rates, they are on the path to improved customer experience. Often, organizations assume or “guess” they can meet demand instead of having a real plan in place based on projected sales or demand forecast.  Capacity planning eliminates the need to guess. 

Capacity planning includes categories that help businesses based on the timelines they have established: 

• Short-term capacity: Usually, this is daily or weekly periods, but it can include quarterly periods. Short-term capacity does not look at trends and cycles but considers customer demand and seasonal variations. 
• Medium-term capacity: This is a one-to-three-year period. Medium-term capacity combines seasonal variation with historical trends to forecast demand. 
• Long-term capacity: This is the maximum period, which varies depending on the type of service. Long-term capacity requires forecasting; the forecasts are converted into established capacity requirements. 

How service organizations benefit from a capacity planning process

Capacity planning helps businesses with budgeting and scaling so they can identify optimal levels of operations: 

• Budgeting benefits: Capacity planning helps determine how services are offered, and the appropriate time frames and staff required to meet current demand and cover all operational costs. This is an important consideration when establishing yearly budgets to effectively allocate money for expenses. The use of demand planning software and demand forecasting software helps with developing financial projections. 
• Scaling benefits: If your business is considering taking on more staff to help meet anticipated demand based on their capacity plans, you might find that aside from increasing employees by 10%, you need specific skills or a larger location for staff and any new equipment requirements.

Factors affecting capacity planning

Capacity planning can accelerate your organization’s innovation while decreasing risk. To help meet demand, assess the service demand factors that can affect capacity, including: 

• Process: Skills, quantity, and quality capabilities 
• Staffing: Job descriptions, total labor, training, compensation, and turnover rates
• External factors: Unions, governmental policies, and budget cycles 

When considering demand, service organizations benefit from the use of predictive demand planning software.  These modern planning solutions match the needs of the business and offer “what-if” scenarios to give insight into outcomes and disruptions that may occur.  Demand forecasts help service organizations with their financial plans and capacity to drive procurement used to deliver their services. 

Capacity planning uses demand forecasts to set prices and contract terms that assist with their services’ times, locations, and timeliness. When these are aligned, the service organization can determine the future profitability of service contracts.

Conclusion

Service organizations have several areas to consider as they grow and scale. Whether it is adding staff or changing pricing, capacity planning can determine how much capital is required. As capacity planning looks at data and operations to make future decisions, use predictive demand planning software to run accurate “what-if” scenarios. 

Capacity planning is an integral aspect of a business. It helps structure growth to ensure the organization maintains a competitive edge in a constantly changing marketplace to meet demand.

Learn more on CCH Tagetik Production Planning & Capacity Planning software.