The principle behind Little’s Law is the fundamental long-term relationship between “Work-In-Process”, throughput, and flow time of a production system in a steady state. This relationship states that the inventory equals the throughput multiplied by the flow time. This principle is often used within the Lean Six Sigma Methodology.
This law is simple and basic, as it easily relates three critical performance measures to any production system. This makes it a principle that’s very basic to manufacturing. The bonus with Little’s Law is that although it does involve mathematical reasoning, the methods by which you’re required to figure BP22 law out a solution are very intuitive. These are all reasons why it is a tool that is often used within the Lean Six Sigma system.
While Little’s Law is superficially a simple conversion of units, it represents something much deeper. This law applies to a number of situations; production lines, factories, single stations, and complete supply chains. While one most closely associates this law with work done in manufacturing, it can also apply to systems where inventory is considered financial orders or even people. Fundamentally, there are few essential requirements needed for Little’s Law; the inventory, throughput, and flow time must be measured in consistent units and represent long-term averages of a stable system.
With these fundamentals of Little’s Law now understood, it can be seen how this law can apply to lead times in a variety of situations. If in your business, it is the customer wait, this number can be easily calculated using the number of people waiting as the inventory, while the throughput is the average wait per customer, and the wait length is equal to the number of persons waiting divided by the processing rate. It can be used here to figure out the customer waiting time (lead time), so it can then be reduced using Lean Six Sigma principles.
A business with planned inventory can also benefit from Little’s Law in order to reduce lead-time. Planned inventory is used in cases when protection against system variability is necessary to guarantee the customer receives high quality delivery service. Applying it here means that the FGI is equivalent to the throughput multiplied by the planned inventory time.
Little’s Law is the perfect Lean Six Sigma tool for lead time reduction. While it appears on the surface to be a complex mathematical equation, breaking it down and thinking about how it applies to your particular business makes it easy to understand. By using these principles to figure out your lead-time, you can then work on reducing it effectively.
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