How do you measure the gap between your capacity and demand?

1 Define your capacity and demand

The first step is to define what you mean by capacity and demand in your context. Capacity is the maximum amount of output or service that you can produce or deliver with your available resources, such as staff, equipment, space, time, or budget. Demand is the actual or expected amount of output or service that your customers or stakeholders require or request from you. Depending on your type of business, industry, or function, you may need to measure capacity and demand in different units, such as units per hour, customers per day, transactions per month, or projects per quarter.

2 Collect and analyze data

The next step is to collect and analyze data on your current and historical capacity and demand levels, as well as any factors that may influence them, such as seasonality, trends, events, or changes in the market or customer behavior. You can use various sources of data, such as sales records, customer feedback, inventory levels, production reports, or service logs. You can also use tools such as surveys, forecasts, simulations, or scenarios to estimate future capacity and demand levels based on different assumptions or variables. You can use techniques such as charts, graphs, or dashboards to visualize and compare your data and identify patterns, gaps, or anomalies.

3 Calculate the gap

The third step is to calculate the gap between your capacity and demand, which is the difference between the two values at any given point in time or over a period of time. You can use formulas, spreadsheets, or software to perform the calculations and express the gap as a percentage, a ratio, or an absolute number. For example, if your capacity is 100 units per hour and your demand is 80 units per hour, your gap is 20 units per hour, or 20%, or 0.8:1. You can also calculate the average, minimum, maximum, or standard deviation of the gap to get a more comprehensive picture of your capacity and demand situation.

4 Evaluate the gap

The fourth step is to evaluate the gap and determine whether it is positive or negative, and whether it is acceptable or unacceptable. A positive gap means that your capacity exceeds your demand, which may indicate that you have excess or idle resources, or that you are missing out on potential opportunities. A negative gap means that your demand exceeds your capacity, which may indicate that you have insufficient or strained resources, or that you are losing customers or compromising quality. A positive or negative gap may be acceptable if it is within a certain range or threshold that you have defined based on your business objectives, constraints, or standards. However, if the gap is too large or too frequent, it may be unacceptable and require corrective actions.

5 Adjust your capacity or demand

The fifth step is to adjust your capacity or demand to close or reduce the gap, or to maintain it at an acceptable level. You can use various strategies, such as increasing or decreasing your resources, improving your efficiency or productivity, outsourcing or insourcing some activities, diversifying or focusing your products or services, pricing or discounting your offerings, promoting or limiting your marketing efforts, or creating or managing customer expectations. You can also use tools such as buffers, reserves, contingencies, or contracts to cope with uncertainty or variability in your capacity or demand. You should evaluate the costs and benefits of each strategy and choose the one that best suits your situation and goals.

6 Monitor and review

The sixth step is to monitor and review your capacity and demand levels and the gap between them on a regular basis, and to measure the effectiveness of your actions and strategies. You can use indicators, metrics, or benchmarks to track and evaluate your performance, such as utilization rate, service level, customer satisfaction, profitability, or growth. You can also use feedback, audits, or reviews to identify any issues, risks, or opportunities for improvement. You should update your data, assumptions, and forecasts as needed and adjust your plans accordingly. You should also communicate and coordinate with your stakeholders and partners to ensure alignment and collaboration.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?