Lag time is time spent waiting for something to happen, during which other activities cannot proceed because they are dependent on the original action. It can become a costly business expense, as regular costs like overhead, employee wages, and so forth continue to apply during this period even though nothing productive can occur. Businesses can use a number of techniques to predict and address lag time with the goal of limiting periods of inactivity.
This can happen for a variety of reasons. Delays in communication are a classic example, especially when business activities span time zones. Time may be spent waiting for communications to arrive and waiting on responses to them from people who must review and consider them. This can be compounded by multiple communication problems, like requesting a report from someone who has to get information from other people to complete it.
Requests for postponement can also create lag time. Customers may delay orders or factories may be forced to go into slowdown. In a simple example, when accidents happen on a factory line, the whole line must be shut down for safety until any injured employees are removed from the scene and safety inspectors have a chance to clear the line for use. This creates lag time, a period where people cannot work because they are waiting to be able to use the line again. It can also have a ripple effect, as problems on one line may lead to issues with another.
Legal delays can also be a problem. A company may be subject to court orders forcing it to suspend operations, or it could be forced to stop engaging in a given activity until it can become compliant with new laws. This lag time may be harder to predict, as companies do not know when they will be subject to shutdown orders until they happen. Union actions like strikes and slowdowns may contribute as well by limiting production and creating lags in delivery of products and services.
Some steps to address concerns about lag time can include creating flexible jobs, allowing people to move on to other tasks when they are temporarily unable to work in their regular positions, along with laying in stocks of supplies so that slowdowns and shutdowns don't spread to an entire company. Simple steps like creating a backlog of usable components for a factory line can eliminate problems when a line must temporarily shut down. Retaining insurance to cover lag time can also be helpful. The insurance company will cover costs during unexpected lags that could not be prevented with commonsense measures.