Having a large number of customers is advantageous, but business owners also need to consider how to deliver items and meet the demands of these customers effectively. Businesses need to do thorough capacity planning to efficiently deliver goods to their customers. With capacity planning done right, businesses would be able to reduce operations costs and offer competitive prices. Several factors are involved in capacity planning that might appear complex but are still an integral aspect of supporting your logistics operations. That’s why today we’ll explore what capacity planning is and how businesses can use it to meet customer demands and compete in the market.
What is capacity planning in last-mile delivery?
First, a quick refresher on last-mile delivery. Last-mile delivery is the final step in the delivery process, i.e. when the goods reach the customer. This is often considered the most challenging stage of the supply chain process. It is because the quality of last-mile delivery determines customer satisfaction. Rising demand for quick deliveries and a customer retention goal can further complicate last-mile delivery.
Customers are uninterested in the difficulties businesses face in meeting their demands. They are only concerned with receiving their goods on time. If your business cannot deliver their products quickly and on time, you risk losing your customers to your competitors. That’s why businesses need to employ various resources to comply with these concerns and prioritise customer satisfaction.
This requires capacity planning so businesses can gain insights into how much workforce and assets they need to prepare.
Workforce and assets
Businesses that ship goods to their customers will require a capacity planner to streamline their delivery fleet operations. There are several factors to consider to ensure smooth fleet operations, including workforce and assets.
Workforce planning refers to calculating the number of workers needed to maintain optimum productivity. Businesses can use a workforce capacity planner to determine whether the number of workers they have is adequate or if they need to hire new employees to boost operations.
When it comes to fleet delivery, workforce planning can be a game-changer. By gaining insights into the number of working employees, businesses will estimate how many deliveries can be completed in a given period.
Plus, businesses can estimate how many delivery zones fleet drivers must cover to maximise vehicle capacity. Through capacity planning for their workforce, businesses can know if they do not have enough workers to maximise productivity and output. They can then hire more workers or scale back on deliveries to ensure their best services.
Assets planning is a part of capacity planning that calculates the number of assets or valuable items that businesses must own to meet targets. Businesses can use asset planning to determine whether they can meet their customers’ demands with their current assets or whether they need to add to their inventory.
Asset planning for businesses that need to ship goods to their customers typically entails overseeing the number of vehicles in their fleet. Conducting fleet utilisation analysis helps determine whether the number of vehicles is sufficient to meet their customers’ demand for reliable and on-time deliveries.
Which factor contributes to capacity planning?
Businesses that ship goods directly to their customers will often find that their capacity planning interferes with last-mile delivery problems. To streamline their shipping process, they need to consider several factors like:
Businesses that deliver goods to their customers will find that fleet size often affects the quality and quantity of their last-mile deliveries. There are three typical elements within the fleet size to keep an eye out for:
- Types of vehicles: Businesses may use several different types of vehicles, each different in size and quantity. This affects the number of deliveries and loads the vehicles can carry on each trip.
- The number of vehicles: Each business certainly has a different scope, so the number of vehicles they have in their fleet will be different from others and most likely in a wide range. Once they have a clear idea of the number of used vehicles in their fleet (minus any vehicles that need repairs, etc.), they can strategically estimate their delivery frequency.
- The number of drivers: The one responsible for operating the fleet and shipping goods to the customers is the individual driver. That’s why businesses need to consider the work schedules of their drivers to ensure there is enough staff on deck to support the delivery process.
Type of goods
Which type of goods your business ships to your customers also plays an important role in capacity planning. Aside from organising the number of items, you will also need to handle items with exceptionally large dimensions, flammable materials, or glassware with care. Those kinds of items might require more manpower or special packaging, so they need to be taken into account too.
Businesses may experience a surge of orders during holidays or celebrations, causing them to become overwhelmed. Knowing when demand is likely to spike is an important aspect of capacity planning that can help businesses better manage their deliveries.
Type of customers
Businesses will almost certainly deal with a variety of customers. Some customers are less concerned about the time it takes to receive their goods. On the other hand, some customers prefer to receive their items the same day, or even within an hour.
When it comes to speedy delivery to ensure same-day deliveries are made, businesses need to ensure sufficient resources (e.g., fleet, drivers, assets) are present to meet the demands. Capacity planning helps ensure that the business has taken these quick deliveries into account and has enough drivers and vehicles ready to go.
Now that we know that several factors contribute to capacity planning, you might wonder how to predict the number of sales and prepare the capacity beforehand to meet customer demands.
Therefore, demand forecasting is the ideal solution. It is an element of business supply chain decisions that forecast customers’ demand to optimise capacity planning.
How to forecast demand?
Here are a few methods your business can use to forecast customer demand:
Businesses can use an analytics dashboard that displays sales graphs from certain periods to forecast demand. With these analytics, they can prepare their capacity, including workforce and assets, before the surge of orders. As a result, they can quickly meet customer demands and compete with other businesses.
- Historical data
Using historical data in demand forecasting means businesses can expect to see an increase and decrease in demand over the year. Businesses can use this method to predict when to increase capacity and when to reduce manpower and assets, ensuring that they don’t waste any resources.
Staying updated with current events around the world also helps businesses forecast demand. Estimating the impact of certain events on their inventory, delivery times, or even the entire process can help businesses deal with customer demand in advance. Businesses can make rational decisions based on accurate data, reducing irrational fear and impulsive decisions.
What to do when demand surges?
When demand increases, businesses will need to increase their capacity to meet this surge. Here are a few practical ways businesses can do that:
- Increase overhead costs
Overhead costs are indirect labour, material, and expense costs. They support ongoing business operations while having no direct impact on revenue. Increasing them will allow your businesses to operate more efficiently during increased demand.
- Increase number of vehicles
Increasing vehicle availability will help during peak demand. Despite the overwhelming workloads, customers expect prompt delivery of their goods. Businesses that don’t have a large enough fleet of vehicles to ship goods may suffer and lose their customers to competitors.
- Hire external 3PL
Third-party logistics (3PL) services benefit businesses that previously insourced their fleet of vehicles during peak demand periods. Even though businesses might need to allocate additional funds for the 3PL, it will streamline their shipping process and keep customers satisfied.
Common mistakes in demand forecasting
Many businesses frequently make mistakes when it comes to demand forecasting. Here are a few, so your business isn’t one of them.
- Failure to understand the capacity requirements
Capacity planning involves calculating the demand requirements. Failing to understand these requirements may lead to detrimental decisions, or your business might miss opportunities that help it grow and stay ahead of the competition.
- Ignoring the usage patterns
Ignoring the usage patterns is another way that businesses can go downhill. Usage patterns or customer demand is a crucial aspect of every business. Most businesses will likely put efforts to fulfil customers’ demands and making themselves reliable to the market needs.
- Inaccurate forecast
Forecasting can be a complex thing to do. However, businesses will need to get the most accurate forecast possible.
We already know how accurate forecasting can benefit businesses. Now, let’s take a look at how inaccurate forecasting can negatively affect them.
Imagine that you’re running a business that sells school stationery. Based on your analysis, you predicted that there would be a high demand for your product at the beginning of the new school year. Unfortunately, if an event like the Covid-19 pandemic occurs, schools move to digital and virtual education. This means that your sales drop drastically. Now, your business experiences a loss of opportunity due to the excess inventory.
- Failing to review the capacity at continual intervals
Reviewing the capacity at regular intervals should be a part of every business’s internal process. By analysing the continuous trend, businesses can recognise the changing capacity trends and how to leverage them to ensure efficient deliveries.
Businesses can incorporate specialised software that includes capacity planning into their system to get the necessary information regarding their capacity. By doing so, businesses can check if they are ready to face changes, surges, etc., in demand in the future.
- Miscommunication between the stakeholders
There will always be differences among stakeholders when it comes to opinions, decisions, ideas, etc. However, these differences should be minor and nipped in the bud through clear communication to avoid misunderstandings.
Miscommunication that occurs between management can have a negative impact on the delivery process. Misunderstanding sales projections and fleet capabilities can result in huge problems with customer satisfaction.
Capacity planning best practices
During capacity planning, businesses may encounter overlapping workflow. As a result, they must first learn best practices for capacity planning to strategise their workflow better.
- Prioritise projects
Businesses must prioritise the projects that are currently on their plate before switching to new ones midway. When it comes to capacity planning, businesses must determine which projects or jobs they should prioritise to benefit the corporation.
- Understand overall demand
The most common issue with capacity planning is that many businesses focus too much on growth by ensuring adequate supply. However, businesses also need to understand their overall demand to avoid excess inventory. Plus, understanding the overall demand can also optimise the workload carried out by employees.
- Analyse your current capacity
Businesses can be more realistic about their internal capacity by analysing their current capacity. By analysing their current capacity, businesses can determine how much work they can complete in a given time. This way, businesses will know whether and how to adjust their current capacity to meet overall demand.
- Consider options with scenario planning
Priority project balancing is an important aspect of capacity planning. However, because there are frequently many combinations of outcomes from multiple scenarios, it is also critical for businesses to consider their options with scenario planning.
Businesses can then make decisions that benefit them while taking objectives and subjective factors into account. This is because there is no single, correct answer. At every decision, a business faces multiple probabilities from each action.
- Expect changes
Even though businesses have planned and prioritised projects in their capacity planning process, it is still possible for them to make inaccurate estimates. As a business owner, you’ll need to adapt by reallocating resources to balance workloads and avoid further problems.
- Capacity planning is an ongoing process
Given the fast-changing nature of today’s market, it will be beneficial to treat your business’s capacity planning as an ongoing process. As a result, you will better adapt to the changes and implement corrective actions.
- Look beyond capacity and demand
The primary goal of capacity planning is to ensure that current capacity matches demand. However, businesses must consider factors other than capacity and demand most of the time. For instance, businesses may have sufficient capacity to meet market demand. Unfortunately, if their workflow is inefficient, it would impact order fulfilment. For example, if employees need to go through several managers and leaders for approval, more time and energy is consumed, leading to wasted potential and time.
Software that helps with capacity planning
Capacity planning is critical to ensure that businesses have enough resources to meet customer demands. Manually performing this method will be tedious. Often data mismatches can confuse and make information messy. To avoid issues when developing your business’ capacity planning, you can use software that helps you plan with some useful features like:
- Smart algorithm
The smart algorithm should allow businesses to gain information on the fleet — specifically vehicles availability. That way, they can gauge the number of vehicles that can deliver items during the capacity planning process.
- Order priority
Order priority allows businesses to place orders on a priority list and subsequently ensure that drivers ship them first before any other items. It is a common practice where businesses offer premium subscriptions to their customers who get the privilege of receiving their items quicker.
- Batch orders
Batch orders will help businesses deal with peak demand by delivering multiple orders in a single delivery run. The feature will allow them to schedule multiple stops and not require multiple trips back and forth to the warehouse.
Capacity planning is integral to business success
That’s probably clear to you now. But we also know how time-consuming capacity planning can be when done manually. But that’s where we come in. At Yojee, we’ve built a system that can help you better strategise your demand, inventory, assets, workforce, etc. — we’ll help you with capacity planning from start to end.
Our goal is to help you become the first choice for your customers. To that end, we’ll help you streamline your capacity planning process as well as solve your last-mile delivery complications to improve the efficiency of your supply chain process.
Give us a call or shoot us an email for a demo here.
Helping businesses overcome their complex supply chain challenges has always been Yojee’s core value. We connect land freight players through our proprietary platform, providing supply chain visibility and enabling seamless communication between shippers and their customers.
Since our founding in 2016, we have worked alongside the world’s largest 3PLs, global freight forwarders, transportation companies, and brand owners to develop logistics solutions that meet their first-mile and last-mile delivery needs.
How Yojee stands out from other logistics providers is our multi-carrier management feature, which allows collaboration between land freight players to meet demands. Coupled with our last mile delivery app for drivers, logistics providers can now efficiently move freight from point A to point B with optimal resource usage. We do all this with one goal in mind: fewer carbon emissions and sustainability.