Companies need innovation to increase their market share and profit margin. Thanks to innovation, companies are able to put new successful products on the market. To get the most out of each new product, companies need to deliver them on time. Unfortunately, what usually happens is that most companies have a lot of projects they could be working on but a limited amount of resources. This can limit companies from delivering innovative products on time.
The issue of having too many projects and few resources can be partially resolved by analyzing the resource capacity. This analysis helps quantify the amount of resources required to undertake the projects that a company has in the pipeline.
There are two approaches to evaluate the resource capacity of the company:
- Determine resource capacity by analyzing active projects
- Determine resource capacity by analyzing product goals
Determine resource capacity by analyzing active projects
To evaluate resource demand, companies can begin with their current list of active projects by prioritizing them from best to worst. To prioritize projects, they can use a scoring model or financial indicators such as NPV or ECV.
Once a prioritized project list table has been created, they can create a detailed plan of action for each project by using a software tool like Microsoft Project. For each activity, they need to note the number of person-days of work and what company department will do the work. The total number of person-days per project per department will be added to the prioritized project list table. This table has to be created for each month.
Finally, to evaluate the resource capacity of the company, it is important to compare the number of person-days each department has available in total with the total number of person-days per department required to execute each project. At this point, it is useful to identify the point in the prioritized project list table where the company runs out of resources. That is the moment when demand exceeds capacity.
Thanks to this analysis, it is possible to understand if the company has the right number of resources to manage all projects that are in the pipeline. In addition, this analysis helps determine which department (or departments) is the one that limits the delivery of products on time.
Determine resource capacity by analyzing product goals
To evaluate resource demand, companies can use an alternative approach to the one that we have just described. Companies can use their product goals to determine the number of new product launches annually. Then, they need to consider the amount of time required to launch a new product on the market successfully.
By doing so, the company is able to determine the number of projects per year to be launched and their different stages. Afterward, it needs to consider the required person-days per stage, categorized by department. Finally, it is possible to determine the resource demand by considering the numbers of projects per stage combined with the person-days requirements, once more by the department, to achieve its new product goals.
Again, to evaluate the resource capacity of the company, it is enough to compare the number of person-days each department has available in total with the total number of person-days per department required to execute each project.
Thanks to this analysis, it is possible to understand if there is a gap between demand against capacity. If there is a gap, the company can decide either to modify its goals, making them a little more attainable; or make difficult decisions by adding resources in order to achieve its goals.
Keep in mind
Usually, this capacity analysis helps companies, and in particular senior management, re-define their new product revenue and profit goals for the business. In addition, it also identifies the functional areas that block companies from delivering innovative products; to solve this problem, companies need to make decisions about increasing or shifting their employees.