The service industry works hard to satisfy customers. Whether your organization is an engineering or consulting firm, maximizing customer experience requires intricate planning and organizational tools. Capacity planning creates real value in ensuring businesses can meet customer demand, and it is a critical path for a positive customer experience.
Defining capacity planning
Capacity is the ability to receive, contain, or deliver its products. Capacity planning is the advanced development of a method or approach to ensure an organization can receive, contain, or deliver its products. Businesses cannot afford to guess when it comes to the volume or types of services, skills, or people they provide, projects they manage, or people/organizations they serve. Planning mistakes are costly, which is why capacity planning must consider input requirements, conversion processes, and output.
Successfully plan your capacity
For service organizations, capacity has a measurable impact. Since the process also determines the number of services or people you can provide, capacity planning is more than a tool just for manufacturers. It can distinguish your service organization above the competition.
To remain competitive, grow, and ensure an over-arching positive brand (customer) experience, your business needs to know how much of a service or how many people you can provide over a specific period based on current projects. Since services cannot be inventoried, the key to a successful capacity strategy is to match long-term supply with predicted long-term demand levels. Capacity planning can align prices or rates to avoid over- or under-charging your customers.
Key considerations for successful capacity planning:
- Allocate resources for specific activities.
- Price service contracts for maximum margin right with customer value and market acceptance.
- Acquire, train, and terminate staff effectively.
- Accurately forecast demand to produce or deliver services.
Meet your budget
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.
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.
To learn more about demand planning and forecasting and their vital role in the capacity planning process, see our white paper.