Capacity Planning vs Resource Planning: Key Differences
Capacity Crunch: Capacity planning helps you evaluate how much work your team members can take on and make sure that resources meet demand without creating bottlenecks.
Resource Ready: Resource planning focuses on allocating the right tools and personnel to the right tasks, so every project has the necessary support to succeed with minimal waste.
A Dynamic Duo: Combining capacity and resource planning helps you optimize performance, balance supply and demand, and align resourcing with your strategic goals.
The Crystal Ball Effect: Proactive capacity and resource planning provide a crystal ball that can help you foresee challenges and opportunities so projects can be completed on time and on budget.
Capacity planning and resource planning are closely related concepts with slightly different scopes.
When assessing capacity, you’re comparing supply and demand and then making decisions about how to address any gaps. In resource planning, you’re more focused on the details—what resources are needed and how to assign and manage resources for effective portfolio management.
What Is Capacity Planning?
Capacity planning involves comparing team member availability with project requirements and then making decisions on how to address any gaps. You can use capacity planning software to make it easier to monitor real-time resource availability and forecast future demand.
Capacity Planning Example
How does the capacity planning process work in practice? Here’s an example of workload capacity planning:
- Your project portfolio consists of two product lines operated using current resources.
- Next quarter, you’re looking to add a new project introducing a third product line.
First, assess your existing supply of human resources. Let’s say you have 10 full-time engineers and 2 full-time product managers to support your existing project needs.
Even though these team members are full-time, that doesn’t mean they have 8 hours a day to dedicate to your project. You need to factor in time for lunch and bathroom breaks, plus sick leave and paid time off if they are regular FTEs (not contractors.)
A more reasonable capacity estimate would be 5 hours a day. This translates to 12 employees x 5 hours/day x 5 days/week = 300 hours/week.
Next, compare your supply with your upcoming project demands. If you assume that the third product line will require the same amount of FTEs (1 product manager and 5 engineers), then your expected demand is 6 employees x 5 hours/day x 5 days/week = 150 hours/week.
How do you reconcile the gap between supply and demand?
- Option 1: Stop supporting one of the existing product lines and allocate resources to the new product line instead. This is a prioritization question.
If your stakeholders decide that the new product line must be added, then you have two more options:
- Option 2: Hire additional resources with the right skills to support the new product line. This involves a choice between three different capacity planning strategies:
- If you engage excess capacity prior to the realization of the need, then this is considered a lead strategy. This can be risky if forecasted demand is not realized, as you’re negatively impacting profitability.
- If you hire incrementally as needs emerge, then it’s a match strategy.
- If you wait to hire until the demand is realized, then you’re employing a lag strategy (production can lag while you wait to get the new resources in place.)
- Option 3: Support three product lines with current capacity. This is risky, as overallocation can lead to burnout.
You'll find our capacity planning template (available via our membership community) helpful as you're completing this process.
What Is Resource Planning?
Resource planning has to do with how an organization allocates resources to execute project activities. It is the process of identifying available resources, assigning project tasks to the right resources based on availability and skill set, and then managing those resources day-to-day.
Resource management software stores things like historical data for your projects, team member schedules, and desired resource utilization to help you craft a robust staffing plan.
Resource Planning Example
Let’s go back to the example where your organization wants to add a third product line. Again, assume that you’ll need 5 engineers and 1 product manager to support this project.
Once you’ve inventoried your upcoming projects and identified their resource requirements, you’ll need to determine resource availability. Do you have enough resources internally to support the work, or do you need to hire externally?
Next, assign resources to project tasks based on the skill sets required. This is where you’d dive into details like how many back end vs. front end engineers are needed to execute the work. Come up with a backup plan in case you’re not able to secure the project resources needed on your preferred timeline.
Then, once you’ve got your resource management plan, allocate specific resources to the project and monitor how those resources are being utilized in real-time. Make adjustments, as needed, during the course of project execution to avoid potential resource shortages.
Capacity Planning vs Resource Planning: Differences & Similarities
Here is a summary of how capacity planning and resource planning are different and similar in a few core areas:
| Capacity Planning | Resource Planning | Similarities | |
|---|---|---|---|
| Purpose | Compares resource availability with project requirements | Identifies, allocates, and manages resources to meet project needs | Evaluates resource availability as a key component |
| Strategies | Lead strategy, match strategy, or lag strategy | Considers resource availability, cost, responsibilities, and dependencies | Considers resource availability and responsibilities |
| Scope | Strategic overview of supply and demand | Detailed view of resource allocation and resource utilization | Assesses resource demand |
| Time Horizon | Ongoing, ideally. Otherwise: at the end of the quarter or fiscal year OR in advance of a new project | Ongoing | Should be evaluated on an ongoing basis |
Differences
1. Different Levels of Detail: Strategic vs. Execution-Oriented
Capacity planning looks at global levels of supply and demand across your project portfolio and identifies any gaps. You can use this information to facilitate decision-making around project prioritization and resource allocation.
Resource planning looks at how resources are allocated at the project level and helps you make staffing decisions based on availability, cost, responsibilities, and dependencies.
2. Different Time Horizons
Depending on the maturity of your organization’s workforce capacity planning process, you may choose to perform capacity planning as a one-time exercise, either at the end of a quarter or fiscal year, or in advance of beginning a new project. Resource planning should always be performed on an ongoing basis.
Similarities
1. Assess Resource Availability
Resource availability is a consideration for both capacity planning and resource planning.
Capacity planning evaluates the capability of your existing pool of resources to support upcoming projects. This includes determining whether these resources have any extra bandwidth to dedicate to other projects.
In resource planning, you’re also taking a look at resource availability to help you make decisions on resource allocation.
2. Consider Resource Demand
Resource demand is another key component of capacity planning and resource planning. If you aren’t able to accurately forecast upcoming project needs, then it becomes difficult to formulate a strategy for how you’ll adjust capacity or allocate existing resources, respectively.
When To Use Capacity Planning and Resource Planning
Take advantage of key inflection points in the business cycle, such as the end of a quarter or fiscal year or the start of a new project, to analyze your existing capacity and compare it against forecasted demand. This will help you make smart and timely hiring decisions.
Once you’ve got a good view of supply and demand, allocate your resources to meet the demand and monitor and adjust, as needed, over the course of project execution.
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