Effective Demand and Capacity Resource Planning In all relationships, harmony and effectiveness is enhanced by the quality and visibility of the forecasting practiced by the participants. How this expresses it’s self can differ for each party. When a supplier is asked to supply a costing to a customer they will typically look at the core cost of the resource pool and work out the utilisation factor based on recent trends. If the utilisation factor can be increased, that would impact on the recovery rate in that more time was chargeable, therefore the supplier would become more profitable. In the case of the customer, forecasting and proactive planning will not only give greater visibility to the current and future workloads, but it will also aid in avoiding duplication, identify synergies and efficiencies. In activities that involve a supplier, good Demand and Capacity Planning should help the supplier achieve far greater efficiencies and improve the utilisation percentage, which should then impact as a reduction in the charge out rate. For internally driven projects the same principles apply, and the benefits, synergies and efficiencies will drive down costs and should reduce the numbers of contractors being engaged. Must suppliers would look to operate a “gain share arrangement” that is a split of the additional profits, and this would be further leveraged to try and get longevity to the overall contractual arrangement. This principle should also apply to “internal” suppliers, as they are often the subject of outsourcing initiatives, or sell off’s. If the costs for the immediate period are “fixed” then the supplier could protect themselves by funding a resource to enable the customer to plan for effectively, again this is a positive move and helps protect the relationship. The table below show very simply the effect of improved resource utilisation based on a sample charge of £40.00 per hour. Supplier Charge Per Hour Supplier Hours | Supplier Cost per Hour | Cost to Supplier | Utilisation Percentage | Customer Hours Drawn | Supplier "Real" Charge Per Hour | | 1,000 | £40.00 | £40,000 | 75% | 750 | £53.33 | | | | | 80% | 800 | £50.00 | | | | | 85% | 850 | £47.06 | | | | | 90% | 900 | £44.44 | | | | | 95% | 950 | £42.11 |
In all these cases the Supplier recovers the £40k required, the workforce is better utilised the customer obtains a more cost effective conversion of effort engaged. Skilled staff can be retained more productively without having to be deployed to less rewarding tasks to fill the vacant time, with improved job satisfaction, greater efficiency, therefore a win for all concerned. | 
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