“The goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present.” – Paul Saffo
The above quote is accurate for project-based businesses, where forecasting resource demands is critical for successful delivery and enhanced profit margins. However, due to the absence of the right forecasting tools and technologies, managers often rely on approximation and guesswork. As a result, they are caught off-guard in the event of demand volatilities and sudden project changes.
Therefore, organizations must invest in advanced resource management software that helps businesses to stay forewarned of resource-related risks and make timely decisions.
This blog highlights the forecasting challenges faced by organizations and how Saviom’s value-driven resource management software can help overcome them.
But first, let’s begin with the basics.
- Resource Forecasting: Definition and its importance
Resource forecasting is the process of estimating various resource metrics, such as capacity, demand, on-the-bench, project vacancy, and resourcing costs, etc., in advance.
It proactively assists in identifying skill gaps, resource excesses/shortages, and estimating project financials and resource costs. This guarantees that all projects are adequately staffed and equipped to respond to unforeseen circumstances, ensuring successful project delivery.
Furthermore, resource forecasting enables managers to gain early insight into non-billable, billable, and strategic work ahead of time. This helps boost profitability by mobilizing resources from non-billable to billable and strategic projects. Thus, with the right resource forecasting solution, businesses can deliver projects on time and within budget, resulting in high client satisfaction and profitability.
Now, let’s dive deep into the various challenges organizations face in project resource forecasting.
6 Major resource forecasting challenges
Below are some of the forecasting challenges that businesses must overcome.
2.1 Unable to foresee future project demands
For organizations to grow successfully, it is imperative for them to deliver projects within time and budget. However, due to a lack of forecasting tools, managers cannot predict pipeline project requirements in advance. Subsequently, resource managers cannot identify the demand vs. capacity gap and bridge the gap proactively.
This can result in project delays and cost escalations due to last-minute firefighting for resources. Additionally, projects that require niche skills may even be stalled due to a lack of lead time to hire the right resources.
2.2 Inability to track under/over utilization of resources
When organizations do not have visibility into their workforce’s schedule and availability, it leads to uneven work distribution. As a result, when a project comes in, few critical resources that are already working at their full capacity are given additional work leading to their overutilization.
Moreover, due to a lack of proper resource forecasting tools, managers fail to predict resource utilization across the enterprise. Therefore, they cannot track underutilized resources or those engaged in low-priority work, such as BAU or non-billable admin tasks. Since resource skillsets might not be fully utilized, this could result in decreased productivity and unplanned attrition.
2.3 Difficulty in maintaining financial milestones for projects
Delivering projects on time and within budget is critical for client retention and profitability. When managers fail to foresee various financial indicators such as cost, revenue, overheads, and profit margins, they cannot achieve the financial milestones of the projects.
Due to the lack of a proper resource forecasting system, managers cannot control project costs ahead of time. As a result, they also fail to compare the estimated budget against the actual spending throughout the project lifecycle. That way, managers cannot implement course corrective measures on time in case of variance. All of this will eventually lead to budget overruns.
2.4 Not able to effectively manage people on the bench
After a sudden ramp-down of the ongoing project and a lack of foresight into future demand, managers fail to identify suitable opportunities for released resources in advance. Consequently, they hit the bench and caused billing loss. These resources are not profitable as they are not generating any revenue for the firm.
These benched resources don’t have enough work to utilize their skills effectively, which lowers their morale and productivity. Often, organizations fire these benched resources due to a lack of sufficient work and later hire similar skill sets at a higher cost to fulfill another project demand. This frequent hiring and firing cycle jeopardizes the firm’s reputation and adversely impacts the revenue generated.
2.5 Discrepancy between planned vs. actual
Lack of foresight into project demand leads to inaccurate estimations with respect to resources, timelines, and financials. As a result, the project’s profitability is impacted by the discrepancy between managers’ estimates and the actual data.
A resource manager might, for instance, assign a resource with a basic skill to a critical task and estimate a certain timeline for its completion. However, in practice, the resource takes twice as long, which causes the firm to miss the deadline and incur losses.
2.6 Frequent hiring/firing cycles due to last-minute activities
Due to a lack of foresight into future project demand, firms often start hiring resources because of improper planning and inaccurate estimation. However, once the work is completed, some resources end up on the bench due to an absence of suitable work opportunities, and eventually, firms have no option but to fire them.
In other circumstances, managers may recruit high-cost permanent resources for short-term requirements. However, once the project is completed, they are let go to minimize an increase in bench size. However, when another project arises that requires similar expertise of the terminated resource, the company initiates the hiring process again. This results in frequent hiring-firing cycles, leading to cost escalations, reputational damage, etc.
Now let’s see how modern resource management software helps you overcome these challenges.
- How can resource management software help in efficient forecasting?
Saviom’s resource management tool provides visibility into various resource attributes such as location, competency, skills, experience, cost rate, and availability. It helps managers to find the best-fit resources from across the organization and maintain employee engagement.
It also assists in forecasting pipeline projects so that project managers can start resource planning ahead of time. In addition, it provides capacity vs. demand reports that help managers accurately gauge the gap and take appropriate resourcing measures to meet the demand.
The resource utilization heatmaps can forecast resource utilization and maximize profitability by mobilizing critical resources from non-billable work to billable work. Additionally, the forecast v/s Actual cost feature helps compare the actual cost of completing a task or project against the estimated cost while minimizing any profit risks.
The bench reports also help predict when a resource will end up on the bench, so managers can schedule them for future projects in advance. This way, one can reduce the bench time of resources between projects.
All these features of the resource management tool facilitate efficient resource forecasting.
Resource forecasting helps managers plan for future demands by considering all the probabilities and outcomes. Therefore, by leveraging the right resource management tool, managers can implement customized forecasting measures for successful project delivery.
Which forecasting challenges have plagued your organization?