The structural problem
A business whose demand triples in season faces a choice with no comfortable answer. Permanent capacity sized for peak idles for months; sized for the average it fails customers exactly when demand is highest.
Forecasting helps, but the decision is about capacity structure rather than about the forecast. A perfect forecast still leaves the question of what to do about it.
Split capacity by how it flexes
| Type | Examples | Lead time to change |
|---|---|---|
| Fixed | Premises, owned equipment, core staff | Months to years |
| Semi-flexible | Seasonal contracts, leased equipment | Weeks to months |
| Flexible | Agency, overtime, subcontract | Days |
| Demand-side | Lead times, booking windows, pricing | Immediate |
The bottom row is the one most often forgotten. Managing demand - extending lead times in peak, incentivising off-peak booking, staging deliveries - is capacity management, and it is usually the cheapest lever available.
Forecast the peak, with a range
For a seasonal business the annual total matters far less than the peak. Two years with identical totals can be entirely different operationally if one has a sharper peak.
- Forecast at the granularity the constraint bites - daily or weekly, not monthly, if that is where capacity fails.
- Produce a range rather than a point, since the plan needs to cope with the bad case.
- Forecast peak timing as well as height; a peak arriving two weeks early causes different problems.
- Model the shoulder periods, where the ramp up and down are frequently where the real cost sits.
Peak timing deserves attention. Recruitment and training have lead times, and being ready two weeks late is nearly as bad as not being ready.
Cost the shortfall honestly
The decision needs a number for what happens when capacity is exceeded. That is rarely just a lost sale.
Depending on the business it may be a lost customer permanently, a penalty clause, overtime at premium rates, expedited freight, or reputational damage in a peak-season review cycle. Those costs are what justify carrying capacity that idles.
Write them down before the planning conversation. Without them the argument reduces to risk appetite and whoever is most persuasive.
Build in review points
A seasonal plan set in advance and not revisited will be wrong. Building in decision points - by this date, given bookings so far, we commit to the additional capacity or we do not - converts one large uncertain decision into several smaller informed ones.
Each review uses the booking curve to date, which is far more informative than the pre-season forecast. Designing those checkpoints is usually worth more than improving the original forecast.
The forecast is not the decision. The decision is how much capacity you are willing to leave idle in February.