Earlier is cheaper: the option value of acting sooner

Detection lead time

In “Preparing for Disruptions Through Early Detection” (MIT Sloan Management Review, Fall 2015), Yossi Sheffi studies the gap between learning that trouble is coming and feeling its impact — he calls it detection lead time. Some disruptions announce themselves days ahead; some arrive with no warning; the worst are discovered only after the damage is in motion.

His conclusion is the part worth memorizing: the earlier the warning, the more a company can do. Time is the raw material of response. With enough of it, a disruption is a planning problem; with none, it's triage.

Our extension: the options get cheaper

Sheffi's point is about how much you can do. Ours — the operational argument underneath ADIP — is about what the doing costs. As the clock runs, options don't just disappear; they disappear in cost order. The cheap ones go first.

That's the option value of acting sooner: earliness isn't a virtue, it's a discount. The same disruption, met at four different moments, runs down a ladder like this:

• With weeks of warning: re-plan. Shift the schedule, re-source the part, re-promise quietly — most of it administrative, little of it costing real money.
• With days: negotiate. Expedite at the supplier's expense, swap modes, reallocate stock between orders — costs exist, but someone else often bears them.
• With hours: buy your way out. Premium freight at your expense, broken promises, penalty clauses — every remaining option bills you.
• After impact: absorb. The only option left is the invoice.

A promise held for the price of an email

Here's the shape of it, with no names attached. A supplier is going to be late on a component your shipment needs. Nobody has said so yet — the tell is quieter, the confirmation that usually arrives and hasn't. An agent catches the slip while the delivery date is still comfortably in the future and opens the decision early.

Because it's early, the best option is almost embarrassingly cheap: ask the supplier to air-freight the part. They're the ones running late, so they carry the cost — a request most suppliers will honor while there's still room to say yes gracefully. The customer's promise holds. The disruption that would have been an expedite bill, a penalty, and an apology is settled for the price of an email.

Run the same event two weeks later and every line changes. The supplier can no longer recover the dates; the air freight is yours to buy; the penalty clause is live. Same disruption. Different discovery date. Very different bill.

Why this pairs with priced alternatives

Priced alternatives are the decision half of this argument; early detection is what keeps them worth pricing. A ranked set of options assembled after the cheap ones have expired is just a well-documented surrender. The pricing has power only while alternatives remain.

That's why ADIP treats sensing and deciding as one motion, not a pipeline with a queue in the middle. The moment a signal opens a decision, the alternatives are assembled and priced while the good ones still exist — and the approval that follows happens with those costs in front of you.