Capacity Planning vs Resource Planning: What's the Difference?

What is capacity planning?

If you’re expecting a group of family or friends to visit, the first thing you do is check the fridge, right? You need to make sure you have sufficient food and drinks for your guests, so you’re not caught off guard, leaving someone hungry. The same rationale applies to business organizations, where it’s known as capacity planning. 

This is the process of anticipating the future business requirements of an organization or client. Capacity planning also aims to ensure resources with the necessary skill sets are made available to address evolving client and business demands. It’s about being prepared, and ready for whatever task or project is likely to come your way. 

What is resource planning?

Resource planning is a close cousin of capacity planning. It involves the efficient management of the resources needed to complete a task or project, whether these are specialist staff members, allocated hours, or outside support. Resource managers can reallocate tasks, change deadlines, and take other measures to ensure project goals are met and workers are not underutilized, overutilized, or experiencing burnout. Resource managers also need to ensure conflicts do not arise over the course of the project lifecycle. In short, they need to maintain a careful balancing act in order to make the best use of their organization’s most valuable resources: tools, time, and people.

How to calculate capacity planning

So now that you understand its value, you’re probably wondering how to calculate capacity planning. The good news is that there’s a formula for that, and it can be broken into three simple parts:

1. First, you’ll need to get a gauge of your company’s utilization rate. This is how many hours you expect employees to actually work on tasks. For example, most US-based employees are scheduled to work a 40-hour week, but at least five of those hours will be used for administration, communication, or even social interaction ( those ‘watercooler moments’). If that sounds like your workplace, the utilization rate will be 87.5% (35 out of 40 hours).
2. Next up are your project requirements. If, for example, you have 10 projects that each require 50 hours per week, that works out at 500 hours needed each week.
3. The last step is to work out your resources at hand. If you have 10 employees working 40 hours a week at a utilization rate of 87.5%, that’ll be 350 available hours per week.

In this instance, the projects require 500 hours per week, but there is only enough staff available to contribute 350. This leaves a shortfall of 150 every week. A project manager would usually seek to rectify this problem by allocating additional resources, shifting deadlines forward, or rebalancing workloads across departments.

Capacity planning example

Still unsure how to do the math? We have a simple capacity planning example to help you on your way. In this instance, we’ve based the figures on the hypothetical situation above, so you can see exactly how it would work in real life. 

Utilization rate 

35 task hours / 40 scheduled hours x 100 = 87.5%

Project requirements

10 projects x 50 hours each = 500 hours per week

Available resources

10 employees x 40 scheduled hours per week x 87.5/100 utilization rate = 350 working hours available per week

Capacity calculation

500 hours required per week - 350 working hours required per week = shortfall of 150 hours per week

Calculating resources for projects

We understand that calculating resources for projects can be challenging, particularly as circumstances evolve. That’s why Wrike has developed industry-leading resource management software to help. Here are three ways you can calculate the resources you’ll need for upcoming projects.

1. Analyze past projects

While most projects are unique, many will fall into similar parameters in terms of requirements or expectations. By checking past records, project managers can see what resources were required to complete a project, and use this as a benchmark for future work. Wrike’s time tracking software automatically logs and stores key data on how your teams’ time is spent — equipping you with valuable information for future planning or forecasting. 

2. Create a resource calendar

Calendars can be a project manager’s best friend, especially when they’re connected to a task list. A resource-planning calendar can help you to keep track of deadlines, adjust resource allocation as needed, and ensure everyone’s working from the same page. Integrate your calendar with other software providers, including MS Teams and G Suite, so that you can easily schedule meetings and projects across departments and stakeholders.

3. Utilize tried-and-tested templates 

If you’re trying to calculate resources fast, templates will help you hit the ground running. Wrike’s resource management solution templates include a product roadmap, communication plan, customizable intake form, and key results and objectives checklist. Prefer a visual approach to resource planning? Kanban boards and Gantt charts will showcase a bird’s-eye view of your project’s needs — keeping you in full control. 

Resource planning example

If you’re looking for a resource planning example, Wrike’s Complex Project with Phases Template is a good place to start. This template helps you break down your project into smaller, assignable tasks; plans and tracks performance using a Gantt chart; and generates a ready-to-go dashboard so you can review project progress once it’s underway. This facilitates an organized approach to large projects so you can make sure you plan your projects carefully and use your resources wisely, delivering on time and on budget. 

Types of capacity planning strategies

There are a number of different capacity planning strategies, all of which have their own advantages and disadvantages. Different strategies will suit certain situations or organizations — project managers will know best what’s the right choice for them.

1. Lag strategy

If you lean towards a more conservative approach, lag strategy might be the best option. This method involves increasing capacity only in response to increased demand. The upside of this is that companies can keep to a leaner model by avoiding higher resource costs where possible. The downside is that they might be caught short and unable to fulfill an urgent request. 

2. Lead strategy

This is the opposite approach, where organizations invest in maintaining a high level of resource capacity in anticipation of future requirements.  This can help to protect them against shortages or downtime. It can also ensure that they can meet urgent demands, avoiding the risk of losing business to better-prepared competition. 

3. Match strategy

For companies that prefer a middle-of-the-road approach, the match strategy is a good choice. Rather than increasing resource capacity in anticipation, or in reaction to demand, match strategy involves smaller, more incremental changes that match with changes in market demand.

4. Adjustment

This strategy is similar, in that it’s about adding or reducing capacity in line with various factors including fluctuations in the market, supply route, or consumer demand. The adjustments could be small or large, depending on what triggers the response.

Key steps of the capacity planning process

Establishing a strong, reliable capacity planning process helps to keep an organization functioning well. Without it, resources will be stretched, deadlines will be delayed, and ultimately, projects won’t be delivered. There are five key steps involved in efficient capacity planning.

1. Get a complete picture of current capacity

This step is about making sure you have a clear understanding of your resources at hand, whether this involves people, time, or products. Wrike’s project management software offers key tools to help get complete visibility, via dashboards, Gantt charts, or Kanban boards. If you’re working out hours available, don’t forget about company utilization: the idea that employees only progress tasks for a percentage of time they’re at work. Using this figure (80% is a common example) will make sure you have a more accurate picture of your current capacity.

2. Forecast your anticipated demand

Next on the list is mapping out your organization’s future needs. This can involve making predictions, guesses, or assumptions of the possible outcomes of a project or series of projects. There are a number of different forecasting techniques available, but most are made through the analysis of historical data analysis as well as predicted future performances. A fully-developed forecast will help you to minimize the risk of being underprepared or under-resourced. 

3. Assess risk factors 

Having said that, no matter how carefully you forecast for the future, situations change, markets shift, and requirements evolve. Cycling through completed tasks or scanning similar project Gantt charts will help to identify common roadblocks or delays that have affected the project lifecycle and could be avoided in subsequent projects. Ensuring complete visibility of a project and monitoring its use of resources will help to ensure that risks are mitigated where possible.

4. Develop a contingency plan

Unforeseen issues occur all the time in the world of project management. A well-prepared project manager will seek to secure potential additional resource capacity, should it become necessary. This could mean checking if the workload could be shared with other departments, or if additional freelance staff could be drafted in as needed. By preparing contingency plans in advance, you can reduce the risk of downtime or delayed deadlines should the unexpected happen.

5. Implement and monitor

Once you have worked out your current resources and estimated requirements, as well as your risks and solutions, it’s time to put all the information together to form a capacity plan. This can be then broken down into a project, tasks, and subtasks. Wrike’s project management software has many task management tools to help, including templates, automation, and customizable calendars.

Top tips for resource and capacity planning

As you can see, there are many different ways to protect and deliver on your organizational goals with effective resource and resource capacity planning. 

However you choose to apply these methods, there are a number of capacity and resource planning best practices available. These include: 

1. Don’t ‘guestimate’ your resources. Use Wrike’s powerful work management software to get a full 360° view of your operations, from tracked time to budget overruns, including any historical records available. 
2. Get a realistic understanding of the risks to your resource capacity plan. Wrike's Work Intelligence™ now includes AI-powered project risk prediction. It leverages data from millions of projects to estimate the project risk level from the beginning of the project to its final stage, helping managers plan for every eventuality.
3. Make resource and resource capacity planning part of your day-to-day operations. Even the best-laid plans can go awry during execution, so it’s important to monitor how a project unfolds. As many of us are now working on-site, remotely, or a hybrid of the two, it’s more important than ever that we can access information in real time to ensure that any potential problems are uncovered quickly. 

With the right resource management software, you can get a complete picture of the resources at your disposal in a matter of seconds. Wrike makes planning,  assessing, and coordinating your resources easy, with all the tools you could need, as well as free guide books, use cases, and FAQs to help you along the way.