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How to Reduce Resource Costs with Capacity Planning?

How to Reduce Resource Costs with Capacity Planning?

Your company’s most valuable asset is not cutting edge technology, intellectual property, or the infrastructure. It is your workforce without whom, none of those assets, as mentioned earlier, will add value to your business.

Today, most business leaders are often running a full-time sprint, trying to keep up with the business’s day-to-day demands. The workforce capital, an essential resource a company requires to take the next step in growth and innovation—is often underutilized or overworked.

Your workforce is also the most significant investment incurred by a company. Therefore, effective and efficient use of your scarce resources will help attain business sustainability and productivity. 

Resource capacity planning can help businesses utilize cost-effective global resources without compromising quality. So, the first step towards reducing your resource costs will be replacing legacy tools with a resource management tool. Before we delve into the details, let us get the fundamentals right!

What is resource capacity planning?

It’s forecasting the gap between capacity and demand for resources, and an action plan to bridge this gap. Capacity planning determines how capable and prepared the organization is to meet future needs without affecting their efficiency.

Here’s how resource capacity planning helps reduce costs:

1) Forecast and bridge skill gap: The Fourth Industrial Revolution will unleash 133 million new roles by 2022. New categories of jobs will emerge and replace existing ones partially or wholly. Along with new positions, the demand for new skills will also be tandem. In a study conducted by the World Economic Forum, 54% of all employees will need to reskill by 2022. So, more than half of the employees will not have the skills to take up these roles.

Businesses need a robust solution that helps predict skill shortages and bridge the skill gap proactively. The capacity planning tool helps identify the skill shortages ahead of time. Only then can appropriate resourcing treatments like training, optimizing bench time, or hiring contingent workforce be applied.

2) Maximize billable utilization: In most businesses, excessive resource capacity goes unnoticed, and hence wasted on non-billable activities. It is especially true for matrix organizations, where the resource demand is continually changing. An intelligent resource management software that automates real-time forecasting of resource utilization can be a saving grace.

Billable utilization, a KPI used to measure productivity and sustainability, can be accomplished with a resource capacity plan. It provides foresight into excess resources that can potentially go to waste and yield zero revenue. 

This forecast helps mobilize excesses from non-billable or low priority to billable or high priority tasks. Besides, remedial measures like advancing g project timelines, reshuffling resources across departments, or selling excess capacity will ensure maximum billable utilization.

3) Competent allocation of resources: Often, managers are left with no choice but to allocate workers to projects at the last minute. And more often than not, these employees lack the skills, availability, or the cost rate that aligns with the project plan. 

This wrongful resource allocation results in time and budget overruns and ultimately derails projects off the tracks. Conditional  resource visibility  is one of the significant contributors to inefficient resource allocation. What you can’t see can’t be tracked, after all.

Enterprise-wide visibility of resources helps deploy the employees with the right skills and cost. Only then, a project can finish within budgeted time and cost. Based on skills, qualifications, experience, location, cost rate, and other selection criteria, competent resource allocation can be made. A resource capacity plan can help businesses use the best visible best-fit instead of a first visible first-fit approach.

4) Forecast pipeline opportunities: Once you have successfully bagged multiple projects, finding the right skill at the right time is crucial. The uncertainty of finding the exact number of skilled employees looms. 

 At the eleventh hour, hasty hirings, or over-allocation of work often results in productivity decline and employee burnout. To prevent last-minute drills of resource allocation, planning resource capacity against pipeline projects helps. 

Using a resource capacity planning tool, the sales team can forecast and estimate resources demands in the opportunity/pipeline level. Accordingly, course-correctors like training, or hiring decisions can be applied to ensure an optimally balanced and skilled resource pool. Thus, the project delivery team will have the right resources ready to take on tasks at the right time. 

5) Minimize bench-time: Bench time accounts for the non-billable time when the resource isn’t active on a client-specific assignment, and, hence, not generating revenue. 

It stems from low project margins, unexpected delays, or inefficient resource allocation. Foresight into future project vacancies and which resources will be on the bench can reduce bench time. 

A resource capacity planning tool enables foresight into the future resource needs and the employees on the bench. Besides, the resource manager can mix and match available employees against project vacancies. 

There could be instances when the available resource might lack the skill needed to take on the task. Capacity planning helps in cross-training them ahead of time to avoid last-minute hasty hiring/firing costs. 

The takeaway:

Desperate times (doesn’t always have to) call for desperate measures. Especially today,when businesses have the option to forecast future resource requirements and have 360-degree visibility of resources to match those demands. Using a proper resource capacity plan, companies can curtail resource costs and sustain amid economic uncertainties. 

The capacity plan does it all from forecasting various resource utilizations, project vacancies, and benched members. Based on which corrective actions like training, hiring, and building an on-demand workforce can be applied to reduce resource costs.

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