Little’s Law

Little’s Law is a basic mathematics equation for calculating lead time. In the layman’s version, it says:

Lead time = Number of units in WIP / Average Production Rate

Let’s say you had 34 items in work-in-process, and you produce 10 per day. That means that it will take any new item 3.4 working days to make its way through your system.

The implication of this equation is obvious. The more work you have in process, the longer it takes product to make it through your system. Now, this might not necessarily mean that the customer will have to wait—you may build to vast warehouses, ready to ship at a moment’s notice.

That situation is still a problem, though. You still have a long lead time. It is just long from a different perspective. It means that you are locked in for days, or possibly weeks. That means that you can’t adjust to shifting customer demand, and you have to wait longer to see product modifications work their way through your system.

Little’s Law is extremely important in make-to-order processes. The customer is waiting the whole time as the inventory snakes its way through your facility. For some companies, this just means they annoy their customers. For others, the long lead time can mean lost business.

Little’s law also applies in customer service. If you know how rapidly you serve customers, and you know how long the line is, you can determine the queue time of your customers. This information lets you work out acceptable service levels and come up with actions to take at particular points, such as when a cashier has more than 3 people in line and calls for help.