Cost of Delay

Comprehending the definition and nature of cost of delay is of paramount importance when developing improved or new products. Learn the basics of cost of delay through reading further:

The Cost of Delay – What is it?

The Cost of Delay (CoD) refers to a means of communicating the effects of time on the anticipated results. It combines value and urgency, which most people find it difficult to distinguish between.  Oftentimes, people tend to focus more on value while overlooking the importance of urgency but in reality, these two things should be given the same importance. The value that can be missed out when something is delivered “late” can be massive.

In simple terms, the Cost of Delay helps people understand and know how time affects the value of something.

Value & Urgency

Having a clear understanding of what cost of delay means generally helps and likely ensures that an organization makes a better decision. It is important that an organization will not only understand and determine the value of something they are working on but also learn how its acquired value diminishes over time.

In general, CoD helps organizations, specifically when developing improved or new products as well as services in three primary ways:

  • Decision-making – this was already mentioned above. Whether it is all about controlling the queues length, experimenting with the WIP limits, optimizing the batch sizes in several different points, the Cost of Delay is a piece of information that will be of paramount importance.
  • Altering the focus – change the focus from cost and efficiency to value and speed so whatever the organization wants can be likely achieved and those unwanted things will be less likely to be encountered.
  • Prioritization – through using the CD3 or the CoD Divided by the Duration, organizations can deliver total value (CD3 is also referred as weighting the WSJF (Weighted-Shortest-Job-First) through calculating the job size and CoD) through Organization should recognize the limits of what can be done and developed, hence taking control over the demand will be important at some point. Organizations should be able to determine where to begin, in what order should things be done, and when to stop and then move into something with more value and is urgent.

Prioritization, hence, should be updated on a constant basis to guarantee that the value delivers the best possible economic result for an organization or a business. CoD, at large plays a huge role in ensuring that not only SAFe or the constant flow model that is typically applied in situations wherein the ARTs or Agile Release Trains are engaged in constant and on-going development helps in eliminating delays and in keeping the system lean.  It also ensures that the business knows what will work and what will not.

Quantifying the Cost of Delay provides a plethora of benefits. However, dealing with this may be a bit overwhelming for some individuals. For those who want to be more familiar about CoD but have not muster the courage to face the fear related with numbers yet, then learning the qualitative assessment will be a good place to start.

— Slimane Zouggari