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Does your organization often find it challenging to predict future resource demand?
Are you struggling to maximize the profitable utilization of your workforce?
Do you have difficulty streamlining resource allocation due to a lack of foresight?
To overcome the above challenges, managers require precise estimations based on accurate insights and information about the resources rather than simple approximation and guesswork. That’s why resource forecasting is the need of the hour!
It helps predict ever-changing scenarios of project resources in real-time so that businesses can take corrective actions proactively. It also ensures that projects are suitably staffed to respond to unforeseen circumstances during the entire lifecycle.
This blog discusses the importance of resource forecasting and how SAVIOM‘s resource management solution can assist in its implementation.
But first, let’s start with the basics.
What is resource forecasting in project management?
Resource forecasting in project management is the process of predicting various resource metrics such as project financials, demand, supply, project vacancy and on-the-bench reports ahead of time. It also involves proactively identifying the types and quantities of resources needed, determining when they will be needed, and ensuring their availability when required.
For instance, consider an AEC firm that has received a project to build a high-rise office building. Here, the project manager would need to forecast the resources required for the project, including the number of construction workers, equipment (e.g., cranes, excavators, etc.), and materials (e.g., steel beams, concrete, etc.). Additionally, they would have to determine the project phases these resources will be utilized and coordinate with different vendors to ensure they are available at the right time.
Now that the importance of resource forecasting is understood let’s explore the advantages in project management.
What are the advantages of resource forecasting?
The importance of effective resource forecasting in project management cannot be overstated. Here are some key benefits of resource forecasting in project completion and delivery.
2.1. Reduces resourcing costs significantly
According to the Deloitte Global Cost Survey, “Cost reduction is the most important initiative for any business.”
Since resourcing costs are a significant expense for most firms, they must control them to keep the project budget on track. Effective forecasting allows managers to foresee project demands to identify and allocate cost-effective resources from low-cost locations. Thus, businesses can reduce unnecessary costs without compromising quality.
Additionally, forecasting enables organizations to avoid the allocation of under-skilled or overqualified resources, thereby eliminating the risk of budget overruns. Furthermore, it also helps managers to replace an expensive senior resource with a competent junior counterpart. This helps create a balanced resource mix that suits the project budget and minimizes cost escalations.
2.2. Provides foresight into pipeline project demands
When resource managers don’t get sufficient lead time to identify best-fit resources in advance, it leads to last-minute firefighting and hiring of high-cost employees. Resource forecasting allows managers to gain foresight into pipeline project demands and analyze the capacity vs. demand gaps. It helps identify excess or shortage of resources and implement necessary measures to bridge the gaps.
In case there is an excess of resources, managers can bring forward project timelines or sell additional capacity. Alternatively, a resource shortfall can be mitigated by bringing in employees from other departments, implementing training and upskilling, conducting planned hiring, etc. Therefore, forecasting helps to address skill shortages and eliminates last-minute recruitment.
2.3. Maximizes profitable resource utilization
One of the primary responsibilities of resource manager is to ensure optimal utilization of resources. For this, they need accurate insights into resource utilization rates to prevent under/over-utilization. Resource forecasting enables managers to understand the breakdown of a resource’s billable and non-billable activities.
Since non-billable activities do not generate revenue, managers can increase billability by mobilizing the workforce from non-billable to billable and strategic tasks. In addition, managers also leverage resource leveling and smoothing processes to eliminate overallocation. This helps maintain the resource health index, improve productivity and deliver projects on time.
2.4. Helps manage ramp-up and ramp-down activities
Forecasting plays a crucial role in managing ramp-up and ramp-down activities. With forecasting, managers can proactively identify and allocate resources during a sudden rise in project demand. Similarly, when there is a sudden ramp-down, managers can foresee when resources are rolled off from projects and implement measures to reduce the bench size.
For instance, managers can allocate these resources to appropriate billable or strategic work before hitting the bench. Furthermore, if the resource’s skills do not match the pipeline project requirements, they can streamline training and shadowing opportunities. This keeps them engaged and diversifies their skill sets for future projects, improving organizational productivity and profitability.
2.5. Monitors and control project financials in advance
According to a report, “only 43% of businesses complete projects within the set budget.”
To combat this challenge, managers must employ resource forecasting to provide insight into financial metrics such as expenses, income, overhead costs, and overall profitability. If these parameters are not monitored or controlled, it will lead to budget overruns, resulting in project derailment.
Thus, managers must track and compare the estimated budget with the actual expenditures during the project lifecycle. If any variances are identified, the project manager can take corrective actions to control expenses. Efficient financial forecasting helps managers improve future budget estimations for similar projects and align them with actual expenditures, contributing significantly to a project’s success.
Now, let’s see how a resource management tool can help in project delivery.
How can advanced resource management software help in efficient forecasting?
Embracing advanced tools and technology in resource forecasting can significantly enhance the ability of employees to accurately predict, plan, identify patterns and trends, and make more informed decisions. Saviom’s advanced resource management software is one such tool that helps managers make better decisions with data-driven insights.
Here’s how-
- The tool provides 360-degree visibility across the enterprise, enabling managers to view the resource profiles, including their skill sets, competencies, cost rate, etc. This allows managers to identify the right resource for projects at the right time.
- Further, the tool’s forecasting capabilities and capacity-vs-demand report help foresee the skill gaps by leveraging appropriate internal and external channels. Thus, it reduces the last-minute firefighting and high resourcing costs.
- The color-coded heatmaps and forecast-vs-actual report also help foresee workforce utilization levels and identify under/overutilized individuals. Accordingly, managers can mobilize underutilized consultants to billable opportunities or implement appropriate optimization techniques for overutilized resources. This will help ease the workload, enhance productivity and deliver projects on time.
- The people-on-the-bench and project vacancy report also help predict when a resource will end up on the bench and the upcoming project vacancies. This enables managers to schedule them for future projects in advance and reduce the bench time of resources between projects.
- Moreover, managers can leverage the modeling and simulation functionality of the tool. It helps analyze various scenarios and compare outcomes by changing multiple metrics such as availability, cost rate, etc. This allows them to arrive at the most viable outcome and apply it to the actual resource plan.
In this way, all these resource management features help in resource forecasting for successful project delivery.
Conclusion
Forecasting involves predicting the likelihood of future events. As resource planning is based on expected future demand, managers must consider all potential project outcomes. Besides, when coupled with advanced resource management software, the aforementioned benefits will provide managers indications of the most likely course of action. Thus, helping them eradicate any challenges ahead of time and improving the organization’s profitability and overall performance.
