Little’s Law
BUAD311 Operations Management
Session 5
1
Last Class
Flexibility and Variety
Calculating capacity when you have
– Multiple products
– Yield issues
– Machine Breakdown
Colruyt Coffee Processing case
2
Objectives: Little’s Law
Relationship among
– Flow (Throughput) Time
– Flow (Throughput) Rate
– WIP
Called Little’s Law
– A general rule that links various performance
measures
– Links flow time and flow rate with work in process
3
Little’s Law
Flow Time = WIP / Flow Rate
time
You
distance
speed
WIP = 6
Now
1 min later
2 min later
Flow rate
2
Flow time
3
Time
4
Little’s Law
Flow Time = WIP / Flow Rate
Inputs
(customers
and/or
materials)
Transformation Process
(components)
Outputs
(goods
and
services)
Little’s Law holds for any stable systems.
5
Little’s Law
Example: Bank Teller
–
–
–
–
(Average) WIP: 6 customers
(Average) Flow rate: 12 customers per hour
(Average) Flow time: 6/12 = 0.5
A customer spends (on average) 0.5 hours in the bank
Does this mean each customer spends 0.5 hour in the bank?
– No because it is an average, it does not dictate that every person is
in the bank for 30 minutes
6
Implications of Little’s Law
Which one is (usually) difficult to measure ?
– Flow Rate
• Increase the flow rate and it will decrease the flow time
– WIP
• Does not have an impact, independent
– Flow time
• If we reduce the flow time we are going to increase the flow rate overall
Keeping WIP fixed, reducing Flow Time results in a higher Flow
Rate.
7
Implications of Little’s Law: Example
Average number of customers in a restaurant: 50
Average number of customers arriving (and leaving) per
hour: 30 flow rate
What is the flow time?
– 50/30 = 1.66 hrs
– A customer spends (on average) 1hr and 40 mins.
How can we increase the revenue?
Revenue is proportional to Flow Rate = WIP / Flow Time
Increase WIP:
Add more chairs...