The Complete Walkthrough To Capacity Planning

Ruth Hadari
Ruth Hadari
Agile Advocate, Engineering Ops Expert
Posted on
Jan 19, 2023
Updated on
Jan 19, 2023
Table of Content

Setting goals can be overwhelming. You know what you want to accomplish, but how do you ensure these objectives are fulfilled? This can be confusing and intimidating for even the most experienced entrepreneurs.

Lack of preparation can lead to businesses failing. Statistics indicate that roughly 20% of small businesses fail within two years, 45% within five years, and 65% within ten years. Only 25% of new businesses succeed after 15 years!

This is where capacity planning comes into play. Capacity planning is an essential component of any successful enterprise since it anticipates customer needs, identifies the resources necessary to meet those needs, and forecasts when additional resources will be needed.

When utilized effectively, it can be a powerful means of providing services while managing uncertainties and costs. With this complete walkthrough of capacity planning, you will learn everything you need to know about it, including its types, benefits, and when and how to use it, as well as some templates and an example as a guide.

Let’s get started.

What is Capacity Planning?

In essence, capacity planning is the process of predicting and managing an organization’s resource requirements in order to meet future operational needs. Through this, organizations can identify gaps between current and future capacities and make necessary adjustments to ensure adequate supply as needed.

The process of capacity planning involves forecasting demand for resources such as people, materials, equipment, storage space, and networks over time. This includes analyzing past performance data to project how much capacity will be needed in the future.

Similarly, Agile capacity planning can be included in a Sprint plan, where you calculate your team's capacity and help the team understand the amount of engineering time available in a Sprint.

Through capacity planning, organizations can take a proactive approach to resource management, helping them stay ahead of the competition and remain relevant in today’s ever-changing market.

3 Different Types of Capacity Planning

There are various types of capacity planning approaches that organizations can utilize, including workforce capacity, tool capacity, and product capacity.

Each approach has its own unique characteristics, which should be taken into consideration when deciding on an approach best suited to a particular organization's needs.

Workforce Capacity Planning

Workforce capacity planning is the process of determining how many people are needed to complete certain tasks and jobs within a company.

It involves analyzing current production levels, estimating future demand, setting staff requirements, and ensuring that the right number of employees have the necessary skills to meet these demands. By properly forecasting labor needs, companies can better manage their resources while reducing costs and improving efficiency.

Through careful analysis, forecasting, and monitoring with workforce capacity planning, companies can ensure that they have enough staff to handle current demands while also preparing for future growth.

Tool Capacity Planning

Tool capacity planning is a critical component of any successful business, as it involves making sure that the proper resources are available and being used effectively to meet production goals.

Generally, this includes everything that you require in order to deliver the product or service that you provide to your customers, such as electronic equipment, industrial machinery, transportation, and so on. Tool capacity planning includes not only the tools themselves but also their maintenance, scheduling, and other related tasks.

As production levels change or customer demand shifts, the plan may need to be adjusted accordingly in order to stay ahead of any potential issues. This can help ensure that all resources are being used efficiently and effectively while also keeping costs down.

By assessing current needs, developing estimates for future use, scheduling and maintaining tools properly, choosing cost-effective solutions, and monitoring plans regularly, businesses can ensure that their tools are always available and optimally work when needed.

Product Capacity Planning

Product capacity planning involves forecasting demand for products, anticipating customer needs, and ensuring that businesses have the resources to meet them.

It requires an understanding of how future customers are likely to use a product or service, and how customer behavior has changed over time, along with industry trends and changes so that you are able to accurately predict future demand.

This can be used by companies in a variety of different business contexts, including manufacturing, distribution, and retail. To ensure that you have all the ingredients you need to create your own product, raw material management is an integral component of product capacity planning.

As a retailer, it's your responsibility to secure the products you need from suppliers to meet your customers' needs. It might be necessary to forecast seasonal demand, for example, by equipping a store with winter goods for the upcoming winter season.

Why Should You Use Capacity Planning?

The primary goals of capacity planning are twofold: First, it aims to identify whether existing resources can fulfill current or expected demand; and second, it seeks to forecast future needs and plan for the resources required to meet them.

By forecasting future demand, companies can identify areas in which to invest in new equipment or processes, ensuring that they are able to meet customer demands as they grow.

Additionally, capacity planning can help organizations predict shortages or surpluses of certain resources and make necessary adjustments to staffing levels accordingly. Anticipating future needs can ensure that companies are able to meet customer demands and avoid any potential disruptions.

A key component of a successful capacity plan is an understanding of the company’s current capacity and an estimate of how much additional capacity will be needed to meet future goals.

From this information, it is possible to create a baseline against which future changes can be measured. The goals for the upcoming period are determined and compared with the company’s current capabilities.

By analyzing resource utilization, forecasting future demands, and identifying any gaps between available resources and anticipated demand, capacity planners are able to maximize efficiency while minimizing costs for their organization.

What Are the Benefits of Capacity Planning?

With capacity planning, customers are satisfied, costs are minimized, and production is accurate. This is beneficial in a number of ways for your business.

  • Improved Resource Utilization—Capacity planning helps to ensure that resources are allocated correctly, reducing the amount of wasted capacity and allowing for more efficient use of available resources.
  • Reduced Risk—By understanding how much work can be done with existing resources, companies can plan accordingly to avoid overloading systems or personnel, reducing the risk of potential downtime and other unexpected problems.
  • Improved Service Quality—Capacity planning ensures that the correct level of resources is available for tasks, allowing for faster and more efficient execution.
  • Increased Competitiveness—By having a better understanding of their capacity needs, businesses can stay ahead of the competition by being able to respond more quickly to changes in supply and demand issues.
  • Reduced Costs—With an accurate capacity plan in place, organizations are better able to identify areas where costs can be reduced or eliminated, resulting in increased profitability and lower overall overhead expenses.

By understanding both their current capacity and future growth potential, businesses can better plan for changes in demand and ensure that they have the resources necessary to accommodate them. This allows them to optimize their operations and avoid disruptive incidents.

How to Start Capacity Planning?

Knowing how to start capacity planning is crucial for businesses looking to maximize efficiency, reduce costs, and succeed in today’s competitive business environment. To make sure your planning process is as effective as possible, let us examine the best capacity planning tools, strategies, and practices in this section. 

Top 5 Capacity Planning Tools

Capacity planning tools are incorporated into project management software that allows businesses to forecast future capacity requirements and plan accordingly.

These tools provide insights into current usage trends, resource availability, and utilization patterns so that organizations can make informed decisions about their computing requirements. By leveraging these tools, businesses can improve efficiency while avoiding costly overinvestments or underutilization of resources.

Our best tools vary in their functionality, and by the end, you will be able to determine which capacity planning software is most suitable for your company. 

1. GoRetro

Cost: Free; premium starts at $29 a month per team

GoRetro leverages Sprint data and team sentiment to help drive continuous improvement with a user-friendly, entertaining, and customizable tool.

As a retrospective tool, GoRetro incorporates Agile capacity planning into data-driven sprint planning. In order to deliver on your roadmap, it is important to plan resources accurately, so you can make informed decisions and mitigate risks by considering team members' availability, personal leave, holidays, on-call duties, and more.

GoRetro's deep data integration allows teams to improve continuously without the hassle of dealing with spreadsheets and tabs. Utilize your existing tools and Sprint retrospectives to speed up decision-making and become a data-driven organization.

2. ClickUp

Cost: Free; premium starts at $5 a month per user

ClickUp is a powerful productivity platform for teams of any size to organize projects, collaborate more effectively, and store all their work in one place.

It offers over 15 customizable ways to view your tasks, like the unique Workload feature that lets you visualize workloads and plan resources efficiently. Plus, its real-time reporting capabilities give an immediate snapshot of progress so you can pinpoint areas needing improvement.

ClickUp's advanced scheduling feature also allows you to easily plan out how much time each task requires, so you know what needs to be done exactly. You can also use the reports feature to get an overview of upcoming projects, workloads, and team performance, allowing you to better manage expectations and prioritize tasks accordingly. 

3. Float

Cost: Starts at $7.50 a month per user

With a capacity management system used by over 3,000 teams, Float is an effective resource planner that helps keep projects on track. The platform's interface offers a precise view of people's tasks and progress, holidays, and public days off, in addition to upcoming assignments and capacity. 

A number of noteworthy features of Float are its ability to streamline project management flows, such as adding milestones, phases, and link dependencies, as well as its forecasting capabilities, which allow you to monitor the budget, actual costs, and utilization rates in real time.

Also, Float is easy to integrate with third-party applications, including project management software such as Jira, Teamwork, and Asana, productivity tools such as Slack and Zapier, and calendars such as Google Calendar and Outlook Calendar.

4. Resource Guru

Cost: Starts at $2.50 a month per user

Resource Guru boasts of its straightforward approach and yet offers a wide range of features for task scheduling, resource management, leave management, plan scheduling, asset management, meeting room booking, capacity planning, and project forecasting.

It can be integrated with other programs, such as ERP and CRM software, providing features to manage projects and tasks. The collaborative aspect of this software allows the user to see who's working on each task and how long it will take them to complete it. Scheduling capabilities are available so that resources are distributed evenly amongst team members, preventing overloads.

There is also an option for monitoring utilization rates of resources, tracking time off taken by employees, and booking reservations in order to avoid double booking.

5. Forecast

Cost: Starts at $29 a month per user

Forecast is a robust management software that offers automation, team collaboration, project management, business intelligence, resource management, and project accounting capabilities.

This tool boasts an efficient AI-powered capacity planning feature enabling users to easily plan and compare projects at the same time. With Forecast's AI you can eliminate non-billable tasks such as project planning, resource allocation, and timesheets so you can focus on what matters.

Forecast stands out for its ability to integrate with a variety of other tools like Azure, Google Drive, or Microsoft Excel. Its user-friendly interface is also further enhanced by highly visual color coding, which helps users track progress in real-time. 

Capacity Planning Strategies

Capacity planning strategies are used to find the most efficient way to allocate resources in order to meet customer needs while also maximizing profits. There are three main capacity planning strategies: Lag Strategy, Lead Strategy, and Match Strategy.

Lag Strategy

Lag strategy is a type of capacity planning strategy used to match production output with expected customer demand. This means organizations don't need to spend more than they have on resources, reducing the chances of having idle capacity.

The goal of lag strategy is to reduce the costs associated with either overproduction or underproduction. Over-producing increases storage costs and may require additional labor hours in order to complete extra jobs, while under-producing leads to lost sales opportunities due to unmet customer needs.

It is possible, however, that a sudden spike in demand can cause a delay while extra resources are acquired, potentially resulting in missed customer deadlines or lost business. This tactic is known as a lag strategy because it could lead to delays when additional demand is faced.

Businesses with predictable demand or those with no drastic changes in requirements are best suited for this capacity planning strategy.

Lead Strategy

Lead strategy is a type of capacity planning strategy that focuses on the proactive management of resources. It involves anticipating customer demand and making sure that the necessary resources are in place to meet it.

This strategy allows companies to stay ahead of customer demands and take advantage of market opportunities as they arise. The goal is to make sure that when customers need a product or service, they can access it quickly and easily.

Lead strategy involves forecasting future trends, analyzing current capacity levels, determining potential expansion needs, and arranging for additional capacity if necessary. Companies use this strategy to anticipate upcoming changes in customer demand so they can ensure their supply chain is able to meet those needs.

Unlike lag strategy, the flip side of lead strategy is the possibility of resources being idle if demand does not meet expectations.

Match Strategy

Match strategy focuses on ensuring the right amount of production capacity matches the demand for goods or services. This is basically a combination of lead and lag capacity planning.

This strategy typically involves analyzing current and future demand to determine how much capacity will be needed and then adjusting production processes accordingly.

The goal is to ensure that the company has sufficient capacity to meet customer needs without over- or under-producing. Businesses should also consider external factors such as economic trends, competitor activity, and industry developments that could impact future demand.

Once these figures are established, companies can adjust their production capacity to match the demand. This could include increasing or decreasing production levels, adjusting lead times, and/or making changes to their inventory management systems.

Best Practices for Capacity Planning

You can use these best practices for capacity planning to manage your resources and teams better:

Analyze Current Capacity

Start by analyzing the current capacity of your organization and resources to identify any existing bottlenecks or inefficiencies that need addressing. This is a crucial first step to ensure that your capacity planning aligns with your organizational goals and objectives.

Identify Future Requirements

It’s important to understand what future requirements may be necessary in order for you to meet customer demands, as well as anticipate any potential changes in market conditions or technologies that could impact system performance.

Develop an Effective Planning Model

Once you have identified both current and future requirements, develop a capacity planning model that takes into account both hardware and software requirements, as well as future needs. As part of this process, you should also make sure to include an assessment of how much capacity is available in your current systems so that you can determine where additional investment may be needed.

Monitor Performance

Capacity planning isn’t a one-time event; it requires regular monitoring and adjustment based on performance in order to ensure optimal results. This will help you anticipate any potential bottlenecks or overloads that could impact system performance and customer satisfaction levels.

Take Advantage of Automation

Automation can be a great tool for capacity planning, as it helps reduce the amount of manual effort required to analyze and adjust systems. Tools such as performance monitoring dashboards and capacity forecasting platforms can help take some of the guesswork out of analyzing system performance, and better prepare you for potential spikes or changes in demand.

Review Regularly

Last but not least, make sure to review your capacity planning regularly in order to ensure that you’re meeting current requirements while also preparing you for any future needs. This will help keep your organization Agile and able to respond when needed without having to invest too much time or effort into making any necessary adjustments.

Capacity Planning Templates

Rather than relying on guesswork and potentially wasting resources, take a look at these capacity planning templates to accurately gauge your team's workloads and project plans.

Aside from that, these templates can provide better visual insight into future resource requirements and enable better forecasting and budgeting decisions. 

Template 1: Resource Utilization and Capacity Management

This capacity planning diagram template is critical for project and line managers to incorporate resource management into the business successfully. With this template style, you can guarantee that essential resources are allocated for key projects and gain insight into all resources and how they are assigned to projects and core workloads.

Source: Slideteam

Template 2: Project Capacity Planning Template

This capacity planning template allows you to plan for the resources necessary to accomplish a project effectively. It organizes personnel, materials, equipment and more, into individual categories so you can easily evaluate the HR and non-HR needs of your project or business. 

With this dashboard design, you can accurately anticipate future requirements and make sure that the right people with specialized skills are available when needed. This will help guarantee success in planning, resourcing, and finishing your work on time.

Source: Smartsheet

Template 3: Agile Resource Capacity Planning Template

You can forecast Agile project capacity using this template by tracking resource names, start and end dates, and duration in days for each role. In this case, you can incorporate a Gantt chart to view the team's resource distribution and capacity requirements based on roles and skill sets. This way, you can accurately estimate the resources needed for the project.

Source: Smartsheet

Capacity Planning Examples

1. Clearly Identifying Tasks 

You can see that the capacity planning software integrates well with the overall plan and workflow of the team in order to provide a clear visual representation of everything.

In the example given, the designer is responsible for creating a Homepage Design that ties into the developer's workflow with the procedure for reporting and exporting said software project.

As part of the capacity plan, multiple tasks, as well as leaves and paid time off, are integrated into a single workflow to ensure that expectations are properly set among team members.


2. Real-Time Timesheet Data

Organizations looking to stay ahead of the curve and gain an accurate understanding of how their team is spending their time can benefit from utilizing real-time tracking data.

Using the example provided, when team members complete their timesheets, their logged hours will appear in the planning grid. The ability to see when someone has exceeded their allotted working hours allows you to correct the situation as soon as possible.

This data can be used to create capacity and resource plans, helping teams prioritize projects or program work on a daily basis. The hours allocated for each project are displayed in individuals’ dashboards, allowing them to manage their workloads efficiently.



With this comprehensive guide, you are now able to apply capacity planning to your business and measure resources more accurately in order to reach your goals.

By utilizing this process, you can ensure continued success by staying ahead of the competition, and meeting customer needs quickly and effectively.

About the author

Ruth Hadari
Agile Advocate, Engineering Ops Expert

Highly experienced in leading multi-organizational teams, groups, in-shore as well as off-shore. The go-to person who is able to simplify the complex. An agile advocate, experienced in all common methodologies. Responsible for the entire software development lifecycle process from development, QA, DevOps, Automation to delivery including overall planning, direction, coordination, execution, implementation, control and completion. Drives execution, and communicates on status, risks, metrics, risk-mitigation and processes across R&D.

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