Once you've figured out how many people your organization needs and what kind of roles they’ll fill, the next logical question is: can we actually get them? That’s where supply forecasting comes into play. It helps figure out how many people are likely to be available—both from inside the company and outside—after factoring in things like absenteeism, retirements, promotions, people leaving, or even shifts in working hours or conditions.
At its core, manpower inventory exists for one reason: to understand how many people—and with what skills—are available internally to fill upcoming roles. When it comes down to it, there are two major sources from which an organization gets its people: internal and external.
Internal Labour Supply
Organizations should always have a ready record of their employees—stuff like age, gender, education, experience, performance, training, and even potential for growth. It comes in handy during workforce planning. But it doesn’t stop there. You’ve also got to think ahead—about retirements, transfers, promotions, and even unexpected things like someone quitting suddenly.
And yes, people do leave, fall sick, or just don’t show up sometimes. That has to be accounted for, too.
To prepare well, companies often use things like succession plans or replacement charts. These tools help predict when key roles might be up for grabs. Regular manpower audits are also useful. They help figure out who’s doing well, who’s got potential, and what skills the organization already has in-house.
A Few Common Tools:
- Staffing Table Think of this like a dashboard showing how many people are in each role. It breaks them down by age, job level, experience, qualifications—basically a snapshot of who’s where and whether they’re being used well.
- Markov Analysis This one uses past data—promotions, transfers, people leaving—to guess how many employees will be in each role in the future. It’s not magic, just probability.
- Skills Inventory Every employee has their own mix of knowledge, skills, and ambitions. A good organization keeps track of this and updates it every now and then. It helps when filling new roles, assigning tasks, or making training decisions. Of course, it needs to be confidential.
- Replacement Chart It’s a simple chart showing who’s in each role and who’s next in line. Quick and useful during unexpected exits.
- Finding Manpower Gaps This is where the internal supply is matched against forecasted demand. When you compare the people you have with the people you’ll need, the gaps—whether in numbers or skill—start to show.
- Making HR Plans Because the business world isn’t still—things change all the time. Maybe your product line changes, or a union contract shifts things. HR needs to stay flexible. That’s why demand and supply estimates must be turned into real HR policies and strategies for things like hiring, training, promotions, and retirement.
External Labour Supply
Sometimes, there just aren’t enough people in-house to fill all the roles. Maybe the organization is growing fast or entering new areas. That’s when you start looking outside.
Now, external hiring isn’t random. Companies that think ahead try to anticipate what kinds of people they’ll need from the market and where they might come from. The better you plan, the easier it becomes to find the right person at the right time.
These days, companies rarely use pen and paper to keep track of employee details. They use software—tracking everything from experience and qualifications to skill sets and more.
What Affects the Supply Forecast?
When figuring out human resource supply, a planner has to think beyond just numbers. A few major things affect the actual pool of people available.
1. Age Distribution
Breaking down employees by age helps spot trends. Are a lot of employees nearing retirement? Is the workforce too young or too old? This kind of breakdown can be done for different departments, roles, or skill sets depending on what you’re analyzing.
2. Skill Inventory
It's not just about how many people are available—it’s about what they can actually do. Skills inventories give insights into potential promotions, transfers, redeployments, training needs, and so on.
3. Length of Service
Looking at how long people have been with the company helps measure loyalty, retention rates, and stability. You can break this down further by role, location, or department to figure out which areas have high turnover or strong employee retention.
4. Internal Promotions
Promoting employees internally is usually the first choice. HR planners often look at historical trends of promotion to predict how many people might move up the ladder. The feeder group (people ready to be promoted) needs to be studied in terms of skills, age, and readiness.
It’s also possible to shift employees around. Say you’ve got too many people in one department but a shortage in another—that’s where redeployment comes in. But this needs careful thought—can those employees adapt to the new role? Will they need retraining? How does this affect salaries and employee morale?
5. External Hiring
If internal options don’t work, hiring from outside becomes necessary. But planners still have to think through stuff like how long it takes to hire, how long to train them, the chances of them sticking around, and how likely the company is to attract good candidates.
That said, internal promotions and redeployment are always preferred over external hiring—at least initially.
6. Mergers and Acquisitions
Bringing in another company means more people, and that changes the human resource stock too.
7. Voluntary Separations
Sometimes people leave on their own. Maybe they find better opportunities, want to retire early, or respond to a voluntary exit plan. Before launching any separation schemes, it’s smart to estimate how it might impact the workforce.
8. Retirement Policies
Where retirement age is fixed, it’s pretty straightforward to calculate who’ll leave and when. Where there’s no fixed age, HR can use past data and current age distributions to make educated guesses.
What Makes Supply Forecasting Tricky?
Despite the best tools and plans, forecasting the supply of human resources isn’t easy. Here’s why:
1. Techniques Aren’t Perfect
Forecasting methods have limits. Some changes—like new laws or sudden closures—can’t be predicted. For example, in tourism, demand swings based on travel trends and unexpected global events.
2. Attrition Is Hard to Predict
Employees might leave for various reasons—retirement, better opportunities, migration, even death. The combined effect is called the attrition rate. But it’s especially tricky to forecast how many will leave due to career shifts or job-hopping.
3. Uncertainty is Everywhere
Turnover, absenteeism, seasonal work, market swings, and tech disruptions all add layers of unpredictability. That’s why forecasts often end up being educated guesses.
4. Bad or Incomplete Data
A huge part of supply forecasting relies on solid employee data. If the data is outdated, missing, or wrong—which happens more often than you’d think—then everything built on top of it becomes shaky.
So, while forecasting HR supply is absolutely critical for solid planning, it comes with its own share of headaches. The key is to use a mix of strategies, rely more on internal development wherever possible, and stay flexible. The more tuned in you are to internal talent and market changes, the more successful your planning will be.
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