5 things you need to know about Cost of Delay

Image by Andy Carmichael via http://xprocess.blogspot.com/2016/04/understanding-cost-of-delay-and-its-use.html
  1. Cost of Delay is the amount of money lost when production time is delayed and product is late to the market.
  2. A project manager must be able to communicate to the ones with the resources in a language they understand, which is money. The Cost of Delay helps communicate this.
  3. The ability to foresee that the cost of production is greater when delaying a product’s launch, will enable product developing companies to make better decisions at the onset of a project. Based on economics, the metric of Cost of Delay is a useful tool to fast and efficient product launching when considered at the beginning of a project.
  4. Delaying the production of a project even by 10 weeks may only cost $10,000 in the production time, but it will inevitably cost more because of loss of sales time. The time period that sales decline remains relatively constant. Therefore, if the product was late 10 weeks, that is 10 weeks of sales that cannot be reclaimed. The peak sales will also suffer because of a competitive market. This link will bring you to a website that can calculate the Cost of Delay for you, https://www.initialstate.com/latecalc/.
  5. A company will pay to shorten its production time; whether that be to eliminate certain features of the product itself or pay to bring in a specialized third party to speed up production time. Either way, to get the product launched on time or earlier will result in a greater profit. However, to bring in a specialized third party would heighten sales to a greater degree because you would not need to eliminated any features. The cost of outsourcing can be budgeted at the onset of a project. Whereas cutting features is a last-minute decision and can be a costly decision if not prioritized by value.

 

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