The Need For a Formal Capacity Model – 10 Services Procurement Secrets (No. 4)

In direct materials procurement and supply chain activities, capacity modeling is one of the first steps to creating an optimal process design and subsequent flow of goods, parts and materials – on inbound, production and outbound levels. Understanding the requirements for production planning is a critical part of maximizing the use of all available resources and minimizing waste and inventory. In reality, capacity modeling for human talent on a contingent workforce basis is not all that different. Getting the most from a single resource or set of resources while minimizing total cost, waste and rework is similar to what we attempt to achieve on a shop floor or in a supplier’s facility when work is carried out on our behalf.

Yet capacity modeling can be far more challenging than other best practices when adopting direct procurement and supply chain best practices to services procurement. Why? It requires a spectrum of capabilities to support the activities. For example, an organization may opt to start with actual spend and then consider looking at a range of FTE-specific elements when building capacity requirement models – before adding skills and knowledge and ultimately considering more advanced criteria such as location level by time period.

The inherent complexity in capacity planning and modeling for services is much greater since “how work is done” is not necessarily limited to a specific plant or set of facilities. Nor are services often “piece work” that can be performed individually and then “shipped” when complete – service tasks must often work in tandem with other activities even in cases when labor is being delivered on a metered-basis vs. one centered on outcomes.

This analysis is based on the Spend Matters research study, Applying Supply Chain Rigor to Contingent Workforce Management, which is available for limited period of time for free download, via the previous link, in the Spend Matters research library.

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First Voice

  1. Pierre Mitchell:

    A good analogy too is Project Management systems that have resource models so that you see the impact of planned projects on certain resources. Most eSourcing systems have a CPO dashboard that shows planned/in-flight projects, but very few can translate that to a resource scheduling view. IT groups and field services groups are a little more advanced, but it’s certainly not a competency that gets extended effectively to the entire workforce, or even just the contingent workforce.

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