Managing Workforce Capacity During Seasonal and Demand-Driven Peaks

An operations manager is well aware that the peak will come sooner or later. For example, the retail rush in December, increased volume of enquiries during the tax season, or an increased number of customers after an outage of services or a better-than-expected campaign performance. The trickiest thing is to accurately assess the required number of employees.

Underestimate the volume of demand, and the service level may drop. But overestimate the required capacity, and the business will have to incur extra costs for unnecessary workforce. It’s at this moment when outsourced business process support can be considered an option, as it allows to flex the workforce in either direction without overpaying for it all year round.

What Makes Operations Teams Underprepared for Demand Peaks

Teams usually rely on last year’s data, but this year’s peak comes earlier, is longer, or impacts a different channel. The natural reaction is to overcompensate. More staff is scheduled as a precaution, and it’s booked weeks in advance before the peak happens.

Such overstaffing leads to overpayment as a consequence. During the period of the peak, there will be a part of the day when the extra staff is simply not needed. In addition to wasted money, there are negative consequences for morale, as agents will have to work some slow hours between busy periods.

At the same time, wage spending increases significantly while the service level doesn’t get better proportionally and even worsens over time.

Besides, there is a secondary problem. The teams that overstaff their peak seasonals every time start losing faith in their forecasts since their predictions don’t match the actual data. And the less confident they are in their planning, the worse they’ll do with the next peak.

In order to be better prepared for the peaks, capacity should be seen as a flexible resource that can grow and shrink depending on the demand. Outsourcing becomes an effective solution for many businesses in such a case.

Identifying the Various Types of Demand Peaks

All peaks are not the same, and treating them the same way is a common mistake.

Seasonal peaks are usually the simplest ones to predict as they happen regularly every year. Cyclical peaks are not that big, but they repeat regularly as well. The companies that cope with them well usually incorporate the required capacity into the regular staffing plan. Event driven peaks are the trickiest as they happen suddenly due to any weather event, system outage, or unexpectedly successful campaign.

The type of a peak defines how it should be prepared for. Seasonal and cyclical peaks require good planning in advance. Event driven peaks require having a flexible resourcing plan in advance as there is no time to build a solution from scratch once the peak started.

Creating a Flexible Capacity Plan

A capacity plan is supposed to be a flexible process, regularly updated based on the current demand.

Start with the historical data. The volumes of calls, transactions, tickets from previous peaks provide a basis for the capacity plan, but not the goal in itself. On top of it, the current demand signals should be incorporated. For example, marketing activity, policy changes, or seasonal characteristics of the industry should be taken into account. If a retailer runs a new campaign, it should affect the capacity planning.

Then the buffer thresholds that trigger certain actions should be identified. The threshold of queue size is a good example. The teams usually find it helpful to define it during capacity planning as this defines how the available resources should be allocated over a period of time in order to match the expected demand. This approach helps to have a proper solution ready to be implemented at a certain stage without improvisation and to know the exact trigger for actions.

Forecasting quality matters here too. The capacity plan is not going to work without a solid demand estimate. Small forecasting errors multiply during a peak rather than averaging. Relationship between forecasting quality and customer experience outcomes should be considered in detail as forecasting mistakes manifest themselves primarily through service levels.

Regular update of the plan is also important as a capacity plan is not supposed to stay the same for the whole year. Checking it against actual volumes on a regular basis allows identifying mismatches between forecast and demand in time.

The Flexible Resourcing Models Operations Teams Can Use

Once the plan is developed, the next step is to identify where the additional capacity should come from.

Cross-training of the existing staff provides the opportunity to cover the peak demand in case of necessity without hiring additional employees. This approach works especially well in case of short and predictable cyclical peaks.

Using casual or overflow pools of trained staff allows accessing to the required number of people rapidly without the permanent cost of their employment. This solution is suitable for seasonal peaks that occur annually and whose beginning and end dates are known.

Outsourcing of the surge support expands this approach and allows accessing to the pool of already trained teams, which can be expanded and shrunk quickly. In the case of event driven peaks, which occur unpredictably, this option is extremely valuable.

Shift redesign should also be considered. Sometimes the problem is not about headcount but about timing. Changing the coverage schedule to better match the real demand, rather than the standard 9-to-5 schedule, can solve the problem without additional employees.

How to Create the Right Capacity Plan

The optimal combination of the resourcing models is not universal and usually depends on the type of a peak, industry, and the lead time that the team has.

But what makes the difference between a team coping with peaks and a team struggling with them is not the headcount, but how thoroughly they have matched the capacity with the demand. Also, willingness to keep the plan flexible is important.

It’s easier to manage unforeseen peaks if the team uses the regular updates and keeps at least one flexible resourcing option.

This approach allows keeping service levels high during peak periods, but avoiding costs for the excess capacity in the off-peak periods.

FAQ’s

Q1: How far in advance should the capacity planning for a known seasonal peak start?

A1: Most teams start reviewing capacity needs 8-12 weeks prior to the known seasonal peak. It allows preparing for the changes in time without urgency.

Q2: How can operations teams prepare for the peaks which cannot be predicted?

A2: The preparation for unpredictable peaks is usually done via having a flexible resourcing solution already in place, such as outsourced partners who can react quickly.

Q3: What is the difference between capacity planning and forecasting?

A3: Forecasting defines the expected demand, and the capacity planning determines how the resources should be allocated to meet the demand. These processes are related directly and the quality of forecasting influences the quality of capacity planning greatly.

Q4: Does outsourcing makes sense only for large demand peaks?

A4: No, it doesn’t. Outsourcing can be used even for smaller short-term peaks, because the main advantage is avoiding the cost and lead time of hiring.

Q5: How often should the capacity plan be updated once the peak period starts?

A5: Many teams check the performance against the plan on a weekly basis during a peak period or even more frequently during the busiest periods. Regular updates allow catching mismatches between forecast and actual demand in time.