What is labour demand forecasting?

Jan 26, 2023

Organisations use labour demand forecasting to know how many staff they need to schedule and when. It is used at a retail, leisure or hospitality venue, hospitals or care homes, call centres, delivery drivers and many other situations. There are many aspects to consider in order to answer the question, what is labour demand forecasting. In this article we cover many of them to help you understand what it is, who is likely to use it and what you need to consider.

What is the definition of labour demand forecasting?

Labour demand forecasting is a function of workforce management that helps businesses determine where, when, what role, and how many employees are needed to successfully meet projected customer demand.

This is usually done in two stages:

  1. Generate a forecast of all factors that correlate most highly with demand (for instance, inbound calls per hour or deliveries per day).
  2. Use this forecast to generate a demand forecast which shows how many staff of each role are needed to meet every level of demand.

Who uses labour demand forecasting?

It is most often found where organisations have a large number of staff who meet the following criteria:

  • Variable staffing levels depending on demand – i.e. peak times and quite times
  • Variable role levels depend on demand – for instance, for low levels of demand, staff can clean and wash up as well as perform other roles, as demand rises, dedicated people are needed for each role.

In short; organisations use labour demand forecasting to ensure they have enough people with the right skills working to match demand. Demand could be driven by the number of customers in a restaurant, calls in a call centre or deliveries for a distribution centre.

The people using labour demand forecasting are outputting a demand curve which breaks down the number of staff required per role, per department in 15, 30 or 60 minute slots. This is called a demand curve.

who uses labour demand forecasting

What is the difference between labour demand forecasting and workforce analytics?

Workforce Analytics uses historic data to help improve performance, whereas labour demand forecasting tends to focus on how many staff are required to meet customer demand.

What is the difference between labour demand forecasting and workforce planning?

Labour demand forecasting tends to focus on the next week or two and is used to decide staff schedules, in particular how many staff are needed to meet demand. Workforce planning tends to be done to recruiting time scales and is designed to help an organisation work out how many new recruits are needed, what skills they should have and what training they need.

What tools can be used to create a labour demand forecast?

To fully understand what is labour demand forecasting we also need to explore what tools can be use to create them. It could be anything from a spreadsheet used to create a prediction of staff based on a manager’s knowledge and experience right up to an AI-powered forecasting and demand prediction engine that integrates directly into workforce management software.

If you run a small business with one shop, you could probably do this easily on a spreadsheet based on your own knowledge. However, for large organisations that have thousands of staff and many locations throughout the country and the world, it is much harder. If they want to be as accurate as possible, they need to take many different factors into account. We cover some of these below.

labour demand forecasting

What is needed to create good labour demand forecast?

Now that we have looked at what is labour demand forecasting let’s look at what is needed. We can break the inputs and requirements into two parts. The forecast of factors that correlate with demand and the forecast of how many staff are required and what skills they need.

Forecast Inputs:

  • Historic data of factors that correlate with demand by time 
  • Weather forecasts
  • Traffic and event forecast – for instance, event features
  • Advanced bookings already taken

Demand inputs:

  • Labour standards input – how
  • Operating model – how many staff of which role are usually required to manage a certain level of forecast demand.
  • Opening times
  • Minimum levels of staffing
  • Role requirements, for instance, must always have a first aider on site
what is needed to create good labour demand forecast?

How many labour demand forecasts do I need to run?

You will need one for every role in every department, for every rota you intend to schedule. So if you have a retail estate of 50 stores with 4 roles per store, you are likely to need 50 x 4 x 52 (weeks) or 10,400 forecasts per year. 

As we have mentioned above, for larger organisations, it would be much harder to run this number of forecasts without using prediction engines.

How often should I run a labour demand forecast?

There are two options; batch and real-time. A batch forecast is usually done weekly so the rota can be scheduled real-time and might be used in a dynamic environment such as a supermarket or a stadium where there are opportunities to re-allocate staff “intra-day”.

What does a labour demand forecast look like?

In its raw form, it is a list of the number of staff per role, per department per hour. By now, you might have a good idea of what is labour demand forecasting, in this example below, we show the demand curve for a role called Optical consultant in an optician. The top layer is the weekly curve, and the big middle section shows Monday – with two people working at the start and the end of the day and 3 during the peak period. 

It is very simple compared to say, a call centre, supermarket or a 24-hour operation like a Vegas casino.

What is labour demand forecasting

We hope that you now have a good understanding of what is labour demand forecasting, below we have related articles

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