The Definitive Guide to Aggregate Planning

November 23, 2021 - 10 min read

Kelechi Udoagwu

Managers must learn to forecast a balance between demand and capacity to make sound decisions when planning projects. Good managers develop a sixth sense for achieving an intricate balance between the two, maximizing their chances of project success over time.

Before we go on, let's define both words:

Capacity is the number of units that can be produced within a timeframe
Demand is the number of units required to fulfill customer or stakeholder needs

You must conduct effective aggregate planning and strategy to ensure your team delivers successful products efficiently and consistently.

If capacity frequently exceeds demand, there's wastage. If demand frequently outweighs capacity, it could lead to poor outcomes, missed opportunities, and a strain and possible breakdown of available resources.

What is aggregate planning?

Aggregate planning is the process of balancing the relationship between demand and capacity to create stability in a workflow. In project management, it is used to manage and schedule activities related to capacity and demand, such as analyzing requirements, deploying resources, and maintaining the set timeline of projects and operations.

Oxford Reference defines aggregate planning as "an approach to planning that enables overall output levels and the appropriate resource input mix to be set for related groups of products over the near to medium term. Thus, the aggregate plan for a car factory would consider the total number of units produced per month but would not be concerned with scheduling individual models or colors. It would, instead, be concerned with the labor and machine hours available in a given period."

Aggregate planning helps teams and managers operate at maximum efficiency by influencing and adjusting workload and capacity to match changing demands.

Aggregate planning examples

Here are a few aggregate planning examples to help you understand the concept of aggregate planning better.

Aggregate planning example 1

A mobile phone manufacturer planning for the first half of 2022 would consider fluctuating trends and changes that may affect sales and marketing in the first quarter of the new year. The aggregate forecast may look like this:

Month	Demand (forecast)	Production Timeline (according to number of working days)
January	19,000	21
February	30,000	20
March	20,000	23
April	30,000	22
May	35,000	21
June	35,000	22
Total	169,000 Units	129 Days

Next, they would calculate the accompanying cost of the demand forecast.

Resource(s)	Cost
Material	$200 per unit
Labor cost per hour	$50 per hour
Subcontracting	$30 per unit
Inventory	$6 per unit, per month

The input data provided helps create a proper aggregate plan, as separate elements are assembled to create a clearer picture for accurate project planning.

Aggregate planning example 2

A software company creates ten products. The demand for seven of these products is increasing, while demand for the last three is dwindling. The company is focused on the overall growth and resources (people, technology, storage, and materials) needed for all ten products for the following year.

If the company makes a forecast for the ten products individually, each forecast may have errors. However, if they combine all ten forecasts, the aggregate demand figure would likely have fewer errors.

This happens because aggregate forecasts are more accurate than individual or disaggregated forecasts. The demand variation for each product is smoothed when aggregated with other products, providing a more accurate prediction. This is also known as risk pooling.

Aggregating the demands of individual products into one software creation plan is a better option than developing software creation plans for each product. The former often leads to better resource and time utilization, improving the company's bottom line.

You gain more efficiency and benefits when you create an aggregate demand forecast rather than isolated demand forecasts.

Aggregate planning example 3

Imagine your company's working-hour policy for full-time employees is eight hours a day, four days a week. The organization's work capacity would be 32 hours a week for one full-time employee or a four-person day.

If demand requires eight full-time employees per week and the organization's capacity is seven full-time employees per week, there is an obvious shortage of one full-time employee per week.

This reveals a problem with human resource capacity planning. You can restore balance by hiring a part-time workforce, encouraging team members to work overtime, or subcontracting knowledge vendors.

What is the purpose of aggregate planning in project management?

In project management, aggregate planning reduces costs in project planning by detailing how much capacity, e.g., production time, inventory, and workforce, is required to respond to fluctuating organizational demands in the short to medium term.

Aggregate project plans help managers categorize projects based on the number of resources they consume and contribute to their product line. This helps the management team and stakeholders have visibility into ongoing projects and programs and see where gaps exist to make timely and informed decisions.

Other purposes of aggregate planning in project management include:

Efficient time management

Most successful projects are timeline-driven and split into defined, actionable items. Aggregate planning helps project managers predict how much time a project will take and allocate sufficient pockets of time to complete different aspects of the project, paying particular attention to critical paths.

Resource management

Aggregate planning utilizes an organization's resources to meet or surpass the expected demand. This reduces resource wastage on individual projects, which can easily lead to demand outweighing capacity.

Cost management

Aggregate planning creates a comprehensive budgeting framework to help companies achieve financial goals, rein in excesses, and improve the bottom line by maximally utilizing available resources and capabilities.

Big-picture perspective

Aggregate planning provides critical data to inform the big-picture perspective in an organization. When it is clear what resources and capacity are needed to satisfy certain demands, it is easier to make data-driven decisions that enable the organization to make the best of every situation.

Types of aggregate planning strategies

Three common aggregate planning strategies are:

Level strategy

This strategy focuses on balancing capacity and human resources in a program or company. The primary requirement for level strategy is a good demand forecast, which determines how much human resources and inventory are needed to meet current demand.

When demand is low, management keeps a level labor force and sustains the production rate. When demand increases, the company can absorb any extra inventory, maintaining the production and employment levels.

Chase strategy

This strategy, as the name implies, means that you are chasing demand. The company produces only when there is a demand and nothing more.

Chase strategy is often used for lean manufacturing and production. Money and resources are saved by waiting until an order is placed. This is an excellent strategy for relatively low-cost production companies.

Hybrid strategy

Hybrid strategy in aggregate project planning is a combination of the level and chase strategy. It seeks to create an equilibrium between the capacity (or production rate), workforce, and inventory levels while responding to demand as it changes.

The hybrid strategy realizes project goals and organizational policies at a considerably lower cost than the level or chase strategy.

The Definitive Guide to Aggregate Planning 2 — Photo by Firmbee.com on Unsplash

Challenges with aggregate project planning

Even with the purpose and advantages of aggregate planning, it comes with some challenges, including:

Bottlenecks

Bottlenecks arise when there are sudden changes in demand and congestion occurs in the project workflow. Bottlenecks reduce team efficiency and create long wait times, higher production costs, and high stress levels.

Smoothing

Changing production, capacity, and other resource levels from one period to another has its wear and tear. Smoothing refers to the cost that comes with making these changes.

Planning horizon

Aggregate planning challenges managers to draw insights from data and customers to forecast demand for a certain period with a degree of certainty. This comes with its risks, such as changing market forces and unpredictable events like COVID-19, which can render project plans useless.

How to create in-depth aggregate planning strategies

The fundamental building block of aggregate planning is the forecast. You cannot correctly deploy an aggregate plan without a thorough forecast containing a vast pool of crucial information.

To get started creating an in-depth aggregate plan, follow the steps below:

Determine the demand forecast for the period covered in the project.
Assess organizational capacity for that period. Capacity can include resources, labor, and equipment. Ensure your capacity can match demand.
Identify necessary policies that must be considered, e.g., internal company policies, outsourcing policies, inventory, workers' overtime, market forces, and regulations.
Estimate the total cost for all the required inputs. Calculate the unit cost of materials, workers' wages, production, inventory, and indirect expenses.
Create alternative or contingency plans to account for varying degrees of change. For example, individual plans may have different backup timelines, schedules, and business process outsourcing workflows to meet demand requirements.
When you have your alternative plans, select the one that best satisfies corporate objectives. Compare your plans and determine how well each one meets these objectives. Usually, this is the plan with less cost or a better timeline.
Do a pilot test to see how well it performs in different scenarios and conditions.

More proactive aggregate planning strategies to create a balance between capacity and demand

Here are a few other proactive activities that help create an in-depth aggregate plan:

Back ordering

Lean into back-order systems. Back ordering is the process of allowing your customers to place orders even if you don’t have sufficient stock on hand. Businesses implement back-ordering when a sudden increase in demand means that products are getting sold faster than they’re being stocked. This helps smoothen the demand process. You can have a process where delivery is delayed until demand catches up with capacity. Advance booking of flights is an excellent example of this.

Pricing as a strategy

Make changes to the pricing during low-demand seasons. For example, when demand is low, give discounts or reduce the price to match capacity. When demand is high, you can increase the price. This is a good way to bring some balance into your product planning.

Use marketing to your advantage

Leveraging advertising and promotional activities can increase demand when executed properly. Regardless of the aim of the project or product, even in internal company projects, advertising strategies are useful for influencing demand.

Create new demand

Create secondary or supplementary demands that boost your existing product. A good example is to offer additional services, up-sell a service, or promote complementary products that work with the ones purchased to keep up demand.

Vary the workforce

Managing human resources and labor can be particularly challenging when demand and capacity have the tendency to shift drastically. Create a balancing system to ensure project success. You can make use of a temporary workforce or subcontract to avoid a high churn rate. This will help balance the scale of human resource capacity in relation to demand.

Using Wrike for aggregate planning

Using a project management software like Wrike helps you match capacity with demand by providing visibility on all the variables that make up your project plans and management.

With Wrike's cloud-based software, you can gain detailed insight into your processes, timelines, workload, etc. This way, you can maximize efficiency, which is the backbone of aggregate planning.

Using views like the Gantt chart and Kanban boards, managers can visualize the different timelines and schedule projects using a phased approach to ensure development runs on time, budget, and specification. A transparent approach to aggregate planning eliminates chaos, enabling teams to share their workflow, calendars, and backlog, offering transparency on how capacity matches demand.

Are you ready to improve efficiency in your team by strengthening your aggregate planning skills? Get started with a two-week free trial of Wrike today.

Kelechi Udoagwu

Kelechi is a freelance writer and founder of Week of Saturdays, a platform for digital freelancers and remote workers living in Africa.

#Project Planning #Resource Management #Project Managers

Collaboration 10 min read

The Ultimate Guide to Creating a Strategic Annual Plan

The first step to achieving goals is to come up with an annual plan. A strategic annual plan makes it easier for managers, team leaders, and company owners to execute their vision for growth. Not only does creating an annual plan give you time to reflect on past accomplishments, but it’s also a great way to make ideas actionable. Keep reading to learn more about what annual planning is and how you can create one that has a significant impact on your organization. What is an annual plan? An annual business plan is a set of goals and milestones that guide a company's operations for the year ahead. It helps guide employees and investors in the right direction. For many people, this year's new year begins with a review of their previous year. They then set goals and make plans for the coming year. Annual planning is a combination of two other important elements: a business plan and an annual plan. A business plan is a document that a company or organization uses to set goals and improve performance. It's similar to a belt-tightening exercise. An annual plan is a strategy that a company uses to set goals and expectations for the coming year. It helps employees visualize where they are headed and how they can get there. The annual plan also sets out a company's long-term goals and helps guide how it will reach these targets. An annual business plan helps workers set goals and holds them accountable for achieving those goals for the upcoming 12 months. Then, there’s strategic planning. A strategic planning process helps an organization identify its mission, vision, and strategic goals. The strategic plan combined with the annual business plan are two key components of a successful strategy. The former provides a framework for the company's goals and intentions, while the latter provides the necessary tools and processes to execute those goals. Overview of a strategic annual plan Here is what is typically included in a strategic annual plan: Analysis of past performance. Reviewing your goals can help you identify areas where you can improve and become more productive. Budget estimations. Financial projections are often included in budget planning. They help you plan for the coming year and identify the right course of action for your projects. A clear vision statement. Expectations must be clearly stated, as well as responsibilities and clear OKRs. Having these elements in place can help keep teams on track and motivated. SMART goals. Set specific, measurable goals and deadlines for your company. This will help you measure how far you've come in terms of meeting the key results. Buffer room. A well-written annual plan should include space for emergencies as well. Having a contingency plan can help avoid unexpected expenses. In a nutshell: the annual plan is a strategy used to plan and execute the organization's goals and objectives. It is usually composed of three phases which are strategy, projects, and timing. The importance of an annual plan Annual planning helps define what's important to achieving goals and driving performance. An annual plan also helps keep the workforce united and can be used to motivate and retain employees. A well-written annual plan can help you set the direction for your company while providing the team with a sense of direction. Examples of annual strategic planning Here are some ideas to get you started with your own strategic annual plan: 1. Coca Cola HBC 2020 Integrated Annual Plan Coca-Cola's 246-page report details all aspects of their business. They start by celebrating their wins with statistics. They also include photos of actual customers and partners. Their CEO writes a letter to their stakeholders sharing their biggest accomplishments over the past year. Then they go through their vision. Throughout the strategy, you can see that they are using the pillar method for goal planning. Key areas of focus include leveraging existing business, continuing to win the beverage marketplace, making competitive investments, focusing on employee growth, and expanding their licensing. The overall report is designed well and is reminiscent of a well-crafted white paper. Because the CEO's letter was addressed specifically to stakeholders, we know that this is a tool for increasing investment as well as project planning. Because of this, a lot of the content within it answers the question, “why should I invest in you?” Throughout the rest of the annual plan, each pillar gets its own section. At the top of each section, there is a list of accomplishments from the past year and priorities for the coming year. They also summarize risks, stakeholders, and KPIs. This makes the packet easy to skim but also easy to remember. 2. pep+ (PepsiCo Positive) PepsiCo recently announced that their new 2022 initiative will revolve around “the planet and people.” While this is a long-term process for the brand, the launch will mark the core of their strategic annual plan for the foreseeable future. Their keywords include positivity (hence the “+”), sustainability, and “a fundamental transformation of what we do and how we do it.” On their dedicated landing page, readers can dig deeper into their annual plan. Also well designed, this presentation shows what the future looks like for PepsiCo through refreshed branding and imagery. Symbols such as smiling farmers and healthy, green fields drive the message home. To achieve these new goals, the company will focus on supply chains, inspiring consumers, and driving sustainable change among all its product lines. They link several documents throughout the report, including a comprehensive list of goals which is a great example for your own annual plan template inspiration. This three-page chart names pillars on the left-hand side and targets or actions with due dates on the right. If their goals have numerical metrics, they include data from past years, along with key benchmarks they hope to reach by the end of the year or in the future. Otherwise, their goals are measured in actions. For example, as part of their sustainability pillar, they plan to “develop and deploy disruptive sustainable packaging materials and new models for convenient foods and beverages.” This task is specific and clear, despite the fact that it’s not as quantifiable as some of their other goals. 3. Nestlé Global’s Annual Report Their annual plan is not public but they have shared an annual report on past wins from 2020. In addition to a financial review, Nestlé also shares a new strategy. Starting with important facts and figures the company highlights statistics from organic sales growth and more. They also visualize data about which types of products are selling most and where in the world the company has grown over the past year. As Coca-Cola did, Nestlé also includes a letter to shareholders. They discuss ways in which they plan to grow in the coming year. This includes what product areas they will invest more in and where they will pause or halt efforts. They also emphasize a new product area which will be the focus moving forward in the short term. In this section, Nestlé touches on long-term strategies and how these short-term goals will affect them. In general, their annual report focuses on the word innovation. It mostly has to do with developing new products and revamping old ones. Like PepsiCo, they are using sustainability as a pillar as well as e-commerce. The report goes on to elaborate on each strategy individually. Nestlé lists action steps and provides clear evidence as to why each is important. They also highlight statistics for growth in key areas and name even bigger numbers for where they hope to be in a year. Throughout the report, they include images from ad campaigns that demonstrate the change they wish to continue implementing as part of their marketing plan. Again, branding imagery makes a big difference when creating your own strategic annual plan. It sets the tone for what's written on the page and can help visual learners better understand what you're going for at a glance. Although Nestle's strategic annual plan is designed more like a white paper than a chart, this layout is the most magazine-like by far. It serves as a great example of how you can organize ideas on the page in a way that is interesting and attention-grabbing. One of the most notable aspects of their annual plan is the Materiality Matrix. They use this chart to visualize key areas of interest and prioritize them according to stakeholder values. Within each box, they’ve listed bullet points of business areas this value will impact. It’s a great method for summarizing goals that cover a wide variety of departments and business engagements. Understanding strategic planning best practices Everyone has their own way of thinking about annual plans. Regardless of what you’re trying to achieve, the following strategic planning best practices will help you get there: 1. Use SMART goals A variety of SMART goals are commonly used to help guide and motivate people. They help set realistic benchmarks and are designed to help teams achieve success. It will also help you plan for the ups and downs of your business. To reach your goals, divide them up into smaller goals and set specific deadlines. These goals will help you measure how successful you are at reaching them. 2. Include contingencies For example, having an emergency financial reservoir is a good idea to prevent a potential financial disaster. It can help your company navigate slower seasons while still sticking to your annual plan. 3. Build in flexibility Even minor shifts in external factors can significantly impact on how effective you are at creating and implementing your strategic plan. Never forget that, while we are creating our annual plans in a vacuum, the world will undoubtedly go through more changes this coming year. Even though we can’t predict the future, we can make our plans foolproof by being flexible now. What is an annual plan template? An annual plan template is a document or tool that can be utilized repeatedly to outline the various stages involved in creating an annual plan. Its purpose is to provide a clear understanding of the annual planning process by specifying the actions to be taken and the timeline to follow in order to develop an effective business plan. By utilizing the annual planning template, individuals or organizations can ensure that they have a systematic approach to reaching specific goals, and can enhance the quality of their business plans. Using Wrike to assist with an annual plan template Wrike’s project management software can help you keep track of all your company-related information in one place. It can also streamline your work and help you stay on track. It can also help you keep track of your annual plans and develop a strong strategy. Start by using last year as a reference. By understanding the issues that affected the previous year, a company can improve its performance in the following year. Draw reports of time spent per project and see where your team went over or underestimated. Then look at which tasks tend to drain resources the most. Determine whether or not the ROI is worth it moving forward. Next, set realistic goals. Reflect on last year's statistics from Wrike Reports and put together a plan with a realistic metric for improvement. After, break down big plans into individual steps. Start by focusing on the business goals of the company then outline your key objectives that align with those. Make sure that everyone knows who is responsible for executing and approving each task. Draft a Gantt chart that includes each step broken down into relevant tasks. Remember to add deadlines to every action to keep teammates accountable and keep to realistic deadlines. Then, delegate tasks according to strengths and weaknesses. Use project reporting and individual job performance to assess team members. You may find that those with specialized talent are being tasked with unskilled work when they could help solve major problems elsewhere. Don’t forget to involve the whole team. Start early, plan ahead, and keep everyone involved in the process. Doing so will make it easier to overcome obstacles once the projects are underway. Additionally, ask them for direct feedback on your ideas for the next year. You will learn from the front line what obstacles they may be facing that will affect the timeline. Another bonus of getting your team involved is that it creates more transparency in the workplace. Using Wrike as a part of the process is not only helpful, but the team also keeps learning how to use the system more efficiently as they go. Having a work management platform that enables you to plan and execute annual plans is a good idea. Plus, it's also a good idea to use tools that allow you to collaborate and manage complex processes. Create an effective annual plan today with Wrike’s free trial.

Project Management 10 min read

Everything You Need to Know About Rough Order of Magnitude (ROM) Estimates

A rough order of magnitude estimate, also known as ROM, is an estimation of a project’s level of effort and cost to complete. ROM estimates take place early in a project life cycle and guide strategy and planning choices. In this article, you’ll learn more about ROM estimates and how they are used in project management. Plus, keep reading to discover examples and how Wrike could be used to assist in creating a template for your own rough order of magnitude. What is the rough order of magnitude? A rough order of magnitude estimate is a general estimate of a project's level of effort and cost. It's usually performed during the selection and approval stage of a project. Generally, it’s used for estimating a project budget that doesn’t have a lot of detail. Project estimating is a vital aspect of project management because it helps determine the total budget for the project and whether or not it’s feasible companywide. It also helps keep track of the project's milestones and budget at the very beginning (more on that later). A rough order of magnitude is most commonly used for project screening. ROM is typically meant to be given to executives who need a high-level overview of how much work might cost. This is especially helpful when they don’t yet have the mandate to do a deep dive into the scope and requirements of the work. Comparing the ROMs of different projects helps identify which projects should be prioritized and which ones should be shelved. It can also help uncover and prevent scope creep later on. This tool also helps decision-makers at other levels of the organization make informed choices regarding the project's complexity and costs. That information is critical for proper scope planning before project kickoff. It’s important to know that a ROM estimate is often used for information purposes at the beginning of a project and it’s suitable for use for the lifetime of the project. How to make a rough order of magnitude estimate Estimating a ROM is often thought of as an art. They are quick to make, but the trick is learning how to make them well. Those who are more experienced in coming up with these estimates may have their own way of executing this process. Regardless of how well you understand the rough order of magnitude, it is important to consider the various factors involved in developing one. These include: A guesstimate range of what resources the project will require based on the information you have on hand Opinions from experts and/or higher-ups who hold a stake in the project A variance of at least -25% to +75% Keep in mind that, when calculating ROM, the goal is to provide a rough estimate that is largely accurate even if it’s not necessarily convenient for your plans. By this, we mean you may find it tempting to choose figures on the more conservative side in order to achieve a more desirable outcome. Unfortunately, using inaccurate stats defeats the entire point of creating the estimation in the first place. Great research can help illuminate areas of your rough order of magnitude estimate where it may be tempting to let bias enter into the equation. All that being said, a ROM estimate's variance is not significant enough to deter you from creating one. A ROM estimate provides a starting point for moving forward in much the same way a budget estimate is also used to determine your base. For example, instead of just presenting single-point estimates, managers should present budgets as a range. Remember: the estimate is derived from the available information. If information is missing, you’ll have to make do with what you do know for sure and move forward from there. In fact, you can expect to improve the estimate as the project moves forward. During the planning and implementation phases, the requirements and information will be refined. As you go along, you’ll learn through trial and error what the reality of the project actually is. Rough order of magnitude techniques One technique for creating a rough order of magnitude estimate is known as a definitive estimate. A definitive estimate is a technique that involves estimating an individual project phase or task's level of effort. Planning with this information upfront makes it easier to plot out workloads on visual charts while keeping your team on the same page. This step typically takes a number of hours to complete, but it is a successful way to get an accurate idea of the time and cost of any project. Other popular techniques and procedures for estimating costs include PERT time estimation, COCOMO, and function point analysis. Program Evaluation Review Technique (PERT) PERT charts are used to plan out tasks that will take a certain amount of time to complete. They can also be used to coordinate team members. Constructive Cost Model (COCOMO)COCOMO is a regression model that can be used for estimating the various factors involved in tech and software project management. It is typically used for estimating the size, effort, cost, and quality of a project. Function Point Analysis (FPA)Function Point Analysis is a method of estimating a company's clear business significance. It helps in the evaluation, management, and control of software development. When estimating ROM, it is best to try and estimate in buckets of time and costs. Doing so helps minimize the number of, well, numbers that are required to provide a complete and accurate estimate. Rough order of magnitude examples There are two ways to think about estimating ROM. You can create effort ranges or buckets with approximate figures that any task can fit into. Alternatively, you can use historical data to guide decision-making. Here are some hypothetical rough order of magnitude examples: Creating buckets In this example, a project manager will define effort ranges such as small, medium, and large. Within each range is a total number of hours, personnel, and/or budget needed for tasks that fall in that category. For example, a small bucket may indicate that a task will take two to four hours and is relatively simple or affordable to complete. It all depends on the specific project. Here is a very simple example. Let's say you're considering eating a sandwich for lunch. You know that tasks such as spreading peanut butter and jelly onto two slices of bread would fall into the small category — low effort, low time, and perhaps even a single knife instead of two. However, if you noticed that you're currently out of bread and you know it would take 20 minutes to drive to the store, that task would fall into the medium category because it would take considerably more resources to complete when compared to the spreading task. Historical data Historical data means pulling information from past projects. These projects may have similar tasks, goals, or outlines. This information is good to have on hand in your project management solution. You can use data from projects that didn't go as well as you'd hoped in order to refrain from repeating his mistakes. You can also use data from projects that went above expectations to see where you can replicate those choices here. Let’s continue with our sandwich example. You may have found that in the past when you were craving peanut butter and jelly, it was worth it to you to make the drive. In fact, it also allowed you to run several other errands (a.k.a. projects) at the grocery store. Based on this historical data, you may find that, despite the effort involved, the payoff was worth it in the end. So choosing this path again will be profitable. First-hand experience First-hand experience refers to how experienced the person creating the rough order of magnitude is in this particular field, project type, or as a project manager in general. An expert who understands project management will likely come up with a more accurate ROM than someone on their first day of work. First-hand experience is valuable because you have plenty of anecdotal evidence to back up your estimations from other related projects. It's also helpful because it allows planners to be intuitive about the process and consider the people involved. For example, you may find that a particular supplier often experiences delays. Although the supplier representative promises otherwise, you've seen it happen time and time again. Knowing this, you can factor that into your rough order of magnitude. Now we’ve come full circle with our peanut butter and jelly project. You may have learned from first-hand experience that, despite your intense craving for it, these sandwiches aren't actually worth it for you. You may even have regretted eating them right after you finished and wished you’d opted for a turkey sandwich instead. Knowing this, you may draft an estimate that confirms the amount of resources and effort needed will not have the ROI expected and it would be better to not move forward with it after all. This information isn’t something you can necessarily track with a report. It’s simply a memory of what you’ve experienced in the past. Using this knowledge will help you make better, more informed decisions in your ROM with information you can’t find elsewhere. How to use ROM in project management Project estimation techniques help managers identify the most critical elements of a project and provide them with accurate estimates. These techniques can also be used to plan for resource allocation. It is important that you have an estimate in place before you start a project. Without an estimate, you may not know how long it will take or what resources will be needed. Cost is often one of the most challenging constraints in project management. Having enough money to complete the project is one of the most critical factors in managing it. Creating a ROM will help you understand whether or not it’s financially viable before you even begin. Another key component of a project is time. Having the ability to determine the duration of the work and when specific tasks will take place is very important to project planning. By estimating your project schedule, you can arrange for the people and resources that you need when they are needed. It also allows you to set expectations for the clients. You can create a rough order of magnitude for any project. But there are several project management situations in which it may be necessary to come up with a ballpark idea of what resources will be needed: Larger than normal projects where you will need to provide more detailed information about the project Projects that involve teams across different countries where there may be varying costs and exchange rates Projects that are customized to the client or unique to your team where the product or service is innovative and the scope of the project is being managed through Agile project management methods Even if your project doesn’t fall into one of these categories, a ROM can be used to determine whether or not it’s viable. This is helpful when you’ve got limited resources and more than one project to choose between. Using Wrike to create a rough order of magnitude template Wrike is a project management tool that streamlines the process of organizing, creating, and coordinating a rough order of magnitude. First, start by checking for any historical data from relevant projects you’ve successfully completed. All Wrike users have access to their own detailed project reports. If you have historical data, you can go straight to a more detailed cost figure. It will give you a more accurate and detailed estimate. If you don’t, continue creating your ROM. Then, start breaking the big components of the project down into smaller pieces. Some planners use the top-down approach or the bottom-up approach, both of which can be accomplished with the help of Wrike. A top-down estimating technique breaks down a project into discrete phases and tasks. This method works by estimating the overall time for the project, as well as the phases and work tasks that will be completed within that time frame. If a client tells you that the project has to be done in six months, a top-up approach allows you to estimate how much time you can dedicate to each activity within the project. A bottom-up estimate is a technique that works by estimating multiple tasks and aspects of a project. This step-by-step process combines the various estimates into one final project estimate. In project management, orders of magnitude are typically referred to as broad-brush categorizations of sizes. So use a range when adding in timelines for individual phases and expenses. Tip: don’t forget about project costs spent preparing the ROM and the project management itself. This will take up about 20% of your estimated total time allotted to the project. Next, go above and beyond by using Wrike to calculate risk. Project risk is a set of events that could significantly affect the quality or schedule of a project. It can be triggered by various factors such as unforeseen delays, budget cuts, and legal issues. By estimating the risks involved in a project, you can plan for how those risks will affect the project and develop a risk management strategy later on if you feel that the ROM is convincing enough to adopt the project. Tip: If you’re stuck, talk to your finance department to see if they can help you get a better idea of what things cost. Finally, consider what project planning may look like. Project planning for Agile projects is usually done in phases, with estimates being created initially before the beginning of the sprint. These estimates are then updated during the sprint. Estimation can also happen during a sprint retrospective, where you update the backlog based on the outcomes of the previous sprints. It can also be done during the sprint planning session. The project team is responsible for estimating projects and managing the estimates. They are also involved in the development of the project's documents and databases. Having one central hub for all project estimates makes it easier to organize and communicate your vision and ROM results. As you progress through the project, you should start to produce smaller ranges for accuracy. Over time you will reach a cap for each category that is both realistic and attainable. As the project details become more detailed, the accuracy of the ROM estimates decreases until they are no longer accurate. In conclusion The more data you have about your project, the better it is to draft current project estimates. A project estimation tool can help you build up estimates and track against actuals. It can also help you improve your estimates by recording errors and lessons learned. Discover how Wrike can help you improve your planning and execution with our free trial.

Project Management 10 min read

The Ultimate Guide to Parametric Estimating in Project Management

Parametric estimating is a method of calculating the time, cost, and resources needed for a project. Learn more about parametric estimating techniques with Wrike.

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The Definitive Guide to Aggregate Planning

What is aggregate planning?