Pedro Arantes
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Cost of Delay

Cost of delay (COD) determines the financial impact on the company if it releases a product on the market earlier or later. When a product arrives on the market X months earlier, revenues also roll in X months earlier.
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Zettelkasten, April 07, 2022

Notes

  • Flow principle E3 states"If you only quantify one thing, quantify the cost of delay."

  • Cost of delay (COD) determines the financial impact on the company if it releases a product on the market earlier or later. When a product arrives on the market X months earlier, revenues also roll in X months earlier.

  • The figure below shows the economic impact of a prioritization sequence. Considering each feature takes 3 weeks to finish and generates $10,000 once released, the second scenario generates $60,000 ($$40,000 from A and $20,000 from B) for the company.

Prioritization sequence has an economic impact.

Prioritization sequence has an economic impact.

  • COD is the more eye-opening measurement that a company can infer because if you can't quantify the cost of a queue on the critical path, you can't quantify the benefit of reducing it.

  • You can evaluate the following costs using COD:

    • the cost of queues
    • the value of excess capacity
    • the value of variability reduction
    • the benefit of smaller batch sizes.

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