Principle (Little's Law): the fundamental long-term relationship between Work-In-Process,

throughput and flow time of a production system in steady state is: Inventory =Throughput Motivation Little's law is both fundamental and simple. Because it relates three critical performance measures of any production system, it is a basic manufacturing principle. But, although it has deep mathematical roots, it is extremely intuitive. If we observe a milling machine that cuts 100 parts per hour with a ueue of !00 parts in front if it, we say that it has "! hours of #I$". In spea%ing of #I$ in terms of time, we are ma%ing use of Little's law, which can be thought of as a conversion of units. Inventory is measured in pieces, flow time in hours, and throughput in pieces per hour. &ence, if we divide inventory by throughput we get flow time. 'o, to convert !00 pieces to the time it will ta%e to process them, we divide by the throughput (100 pieces per hour) to get ! hours. *his conversion is useful when diagnosing a plant. If we see what physically loo%s li%e a large amount of inventory in the system, we cannot tell whether this is a signal of trouble until we %now how much time is represented by the inventory. +or instance, if we see ,000 pieces of #I$ in a system that produces 10 per day, this is probably a disastrous system, while ,000 pieces in a system that produces 1000 per hour is probably extremely lean. (-ote however that the efficiency of a system depends on more than how much #I$ is present. *o see how, go to diagnostic tools.) But Little's law is actually much deeper and more general than a simple conversion of units. It applies to single stations, production lines, factories, and entire supply chains. It applies to systems with and without variability. It applies to single and multiple product systems. It even applies to non.production systems where inventory represents people, financial orders, or other entities. /enerally spea%ing, there are only two re uirements for Little's law to hold0 1. inventory, throughput and flow time must represent long.term averages of a stable system, and ,. inventory, throughput and flow time must be measured in consistent units. *o appreciate the first re uirement, suppose we have a production system that has 1ust started up, so that it has inventory but no throughput yet, then inventory will be positive, throughput will be 2ero and flow time will be undefined. 3learly Little's law will not hold. But over time, as the system stabili2es and we get averages for the three uantities, it will hold. *he re uirement of consistent units is simple for the single product case. +or instance, if throughput is measured in pieces per hour, then flow time must be in hours (not wee%s or months). But it is more subtle if we want to apply Little's law to a multi.product system. +or instance, we might have a wor%station that processes several part types, each with different inventory, throughput and flow time. #hile it is perfectly consistent to apply Little's law to the parts one at a time, we can also spea% of them in aggregate terms if we use the proper units. +or instance, we could measure all inventories in units of dollars and spea% of !low Time

throughput in terms of dollars per hour. &ere, however, we must be careful to maintain consistency by measuring throughput in terms of cost of goods sold (instead of in terms of revenue), so that the dollars used match those used to measure inventory. 4easuring inventories and flows in dollars ma%es Little's law applicable to a vast number of situations. Examples 1. Estimating Waiting Times: If are in a grocery ueue behind 10 persons and estimate that the cler% is ta%ing around 5 minutes6per customer, we can calculate that it will ta%e us 50 minutes (10 persons x 5 minutes6person) to start service. *his is essentially Little's law. #e ta%e the number of persons in the ueue (10) as the "inventory". *he inverse of the average time per customer (165 customers6minute) provides us the rate of service or the throughput throughput. +inally, we obtain the waiting time as e ual to number of persons in the ueue divided by the processing rate (106(165) 7 50 minutes).

,. Planned Inventory Time: 'uppose a product is scheduled so that we expect it to wait for , days in finished goods inventory before shipping to the customer. *his two days is called planned inventory time and is sometimes used as protection against system variability to ensure high delivery service. 8sing Little's law the total amount of inventory in finished goods can be computed as +/I 7 throughput 9 planned inventory time :. Tracking Flow Time: #hat is the flow time of an automobile; *he answer, of course, is "it depends". <oes flow time include only the time on the final assembly line; <oes it include time for engine assembly; #hat about components; =lthough we could easily cloc% the time it ta%es an automobile to travel down the final assembly line, it is much less clear how one could directly measure the flow time when other levels of the production process are included. &owever, we can apply Little's law by noting that +low *ime 7 Inventory6*hroughput If we want to estimate flow time for a complex assembly, li%e an automobile, then we simply measure the inventory (in dollars) of all the segments of the process we wish to consider, measure throughput in units of cost of goods sold, and ta%e the ratio. *his will provide a perfectly consistent measure of flow time. >. WIP Red ction: 'ince Little's law implies that for a line +low *ime 7 #I$6*hroughput, it is clear that reducing #I$ while holding throughput constant will reduce flow time. ?ne might be tempted to conclude that #I$ reduction will always

reduce cycle time. &owever, we must be careful. @educing #I$ in a line without ma%ing any other changes will also reduce throughput (see the discussion of 3losed =synchrounous Linesfor an explanation of the throughput vs. #I$ relationship). +or this reason, simply reducing inventory is not enough to achieve a lean manufacturing system. =n integral part of any lean manufacturing implementation is a variability reduction effort, to enable a line to achieve the same (or greater) throughput with less #I$.