CAPACITY PLANNING - Strategic Planning for Project Management

As companies become excellent in project management, the benefits of performing more work in less time and with fewer resources become readily apparent.

The question, of course, is how much more work can the organization take on? Companies are now struggling to develop capacity planning models to see how much new work can be undertaken within the existing human and nonhuman constraints.

Figure below illustrates the classical way that companies perform capacity planning. The approach shown holds true for both project- and non–project-driven organizations. The “planning horizon” line indicates the point in time for capacity planning. The “proposals” line indicates the manpower needed for approved internal projects or a percentage (perhaps as much as 100 percent) for all work expected through competitive bidding. The combination of this line and the “manpower requirements” line, when compared against the current staffing, provides an indication of capacity. This planning technique can be effective if performed early enough such that training time is allowed for future manpower shortages.

Capacity planning:

There is an important limitation to the above process for capacity planning, however: only human resources are considered. A more realistic method would be to use the strategy shown in Figure below, which can also be applied to both project- driven and non–project-driven organizations. Using the approach shown in Figure below, projects are selected based upon such factors as strategic fit, profitability, consideration of who the customer is, and corporate benefits. The objectives for the projects selected are then defined in both business and technical terms, because there can be both business and technical capacity constraints.

Capacity planning:

The next step points up one critical difference between average companies and excellent companies. An excellent company will identify capacity constraints from the summation of the schedules and plans. Project managers will meet with project sponsors to determine the objective of the plan, which is different than the objective of the project. Is the objective of the plan to achieve the project’s objective with the least cost, least time, or least risk? Typically, only one of these applies, whereas immature organizations believe that all three can be achieved on every project. This, of course, is unrealistic. The final box in Figure 9–9 is now the determination of the capacity limitations. Previously, we considered only human resource capacity constraints. Now we realize that the critical path of a project can be constrained not only by available manpower but also by time, facilities, cash flow, and even technology. It is possible to have multiple critical paths on a project other than those identified by classical capacity planning. Each of these critical paths provides a different dimension to the capacity planning models, and each of these constraints can lead us to a different capacity limitation. As an example, manpower might limit us to taking on only four additional projects. Based upon available facilities, however, we might only be able to undertake two more projects, and based upon available technology, we might be able to undertake only one new project.