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For any organization, determining what to do first with limited resources is an ongoing struggle. Learn how to get better at it.

Increase Profits with Cost of Delay and Classes of Service

For any organization, determining what to do first with limited resources is an ongoing struggle. As discussed previously, getting a handle on prioritization begins in the backlog. Many organizations and teams choose to prioritize their backlogs by business value. This could be an actual dollar amount or a range of priority tags representing the expected value, possibly very high to very low. This approach, although intuitive and relatively easy to implement, is missing the concept of cost of delay. Cost of delay adds a time element to an initiative’s predicted value. For example, what would a particular software feature cost the business if it were delayed by six months? Or, more optimistically, what would it gain the company if it were developed and deployed six months earlier?

Cost of delay and CD3

Cost of delay is expressed as value/time. It could be dollars (or any currency) per week, per month or per year. This queueing and prioritization method can be taken a step further by weighting cost of delay by the expected duration to complete the backlog item. This is known as cost of delay divided by duration or CD3 for short. Each backlog item is given a CD3 score that could look something like this:

backlog cost of delay

If you were to prioritize based just on backlog item value (cost of delay), you’d do item Z first. However, when you factor in duration, it becomes evident that you should complete item Y first. The higher the CD3 score the higher the priority. This results in a weighted shortest job first approach. There’s a wealth of knowledge on cost of delay based queueing methods, but suffice it to say that cost of delay and CD3 are well worth the time and effort to learn and implement when prioritizing your backlogs.

Classes of service

A flow-based method that also considers cost of delay is classes of service, which incorporates the concept of urgency and time into your boards. This method can be used with or without calculating CD3 values for your backlog items. There are typically three classes of service that a team will build into their kanban board as lanes.

1) Standard — Normal cost of delay backlog items that have no hard fixed date deadline and where the value is achieved upon delivery.

2) Fixed date — High cost of delay backlog items that have a predetermined fixed date deadline.

3) Expedite — Unacceptable cost of delay backlog items that require attention as soon as possible.

Depending on your organization, most backlog items will be committed to the standard lane. Items that do happen to have a fixed date will be committed to the fixed date lane and be worked on before standard lane items. Fixed date items should also have the due date displayed on their cards. If a backlog item is deemed urgent, it will enter the expedite lane, where it will take precedence over all other cards. Most teams allow for only one expedite card at a time, card (WIP) limits are ignored, and the team may “swarm” the item, with all team members focused on its completion.

favro lanes for classes of service
Lanes for classes of service

Set up CD3 in Favro

Let’s start with CD3 prioritization. First, you’ll need to create custom fields for your backlog item cards. To do this, open any card in your backlog and click “Custom fields -> Create field”. Create custom fields for Cost of delay, Duration, and CD3 score. Once these fields are created, they can be filled in for each card either on the card pop-up or directly in the project tree view.

favro create custom fields for CD3
Create custom fields for CD3

Once CD3 scores are entered for all backlog items, a report can be created by clicking the App selection icon (top right) and selecting Advanced search. Filter down to your backlog and use the settings icon to show the CD3 score column. Finally, click the CD3 score header to sort accordingly. Again, the highest scored items should be targeted for completion first.

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Report to rank by CD3 score

Set up classes of service in Favro

Starting with classes of service in Favro is as simple as creating three lanes on your team’s flow board: Expedite on the top, Fixed date in the middle and Standard on the bottom. Lanes are created by clicking the board menu and selecting “Layout -> Add lane”.

favro board add lanes for classes of service
Add lanes for classes of service

Increase productivity and profits

Whether you use both CD3 prioritization and classes of service together or either one or the other separately, you’ll help ensure that teams within your organization are working towards finishing the backlog items that will earn the company the most, save the most and deliver the most value to the customer as early as possible. It might take a bit more upfront time, but the results can be exponentially positive and well worth the investment.

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