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AEulogyforLittlesLaw
June 30, 2015

Math

Inventory, Material Flow

One of the most significant fundamental

relations in lean manufacturing is the
relation between the inventory, the
throughput, and the lead time. The
inventory and the throughput are usually
easy to measure. The lead time, however, is
more difficult. You would need to take the
time when a part enters the system and
then take the time again when a part leaves
the system. Luckily, the lead time can easily and accurately be calculated using Littles Law, one
of the most fundamental laws in lean manufacturing (and also many other places).
Littles Law was first published around 1954. It is named after John Little (an MIT professor and not
one of Robin Hoods merry men
). He did not invent the law, but he was the first to mathematically
prove the universal validity of it in 1961.

TheVariables
First, lets first explain the variables. Throughout this post, I will use a supermarket checkout as an
example, assuming that all of you have at one time or another waited in line at the checkout. Hence,
our example system is the checkout system, defined as the system including all customers waiting in
line or being processed (but not still shopping for goods).

Inventory
Inventory is simply the number of parts in the observed system. You could also call it WIP (Work in
Progress). For our supermarket checkout, the inventory would be the number of people waiting in
line, including the customer currently being served (but not the cashier that would be the process).

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The inventory is usually quite easy to

measure. You simply count the number of
parts in the system, either by hand or by
looking up your ERP data. You could use
the current inventory if you are interested
in a current state of the system. You could
also use the average inventory over a
longer period if you want to analyze the
average behavior of the system.

Littles Law applies here!

Throughput
The throughput is the average number of parts completed in a given time. Taking again the example
of a supermarket, it could be measured in customers per hour.
The throughput is also rather easy to measure. You check how many parts you have produced during
a period of time. Dividing the number of parts by the total time gives you the throughput.
As for the throughput, again there are different ways you could measure it. You could look at a longer
period, including weekends and off-shift times (i.e., how many parts did you produce during the
month?). Alternatively you could only observe during actual working hours (i.e., how many parts did
you produce during an 8-hour shift?). Both are possible. Depending on which one you use, you will
get the throughput time in working hours or total hours including off-time.

LeadTime
The lead time is the time a part takes to
pass completely through the system (i.e., it
is the time between entering and leaving
the process). In the example of
supermarket checkouts, it is the time from
when you start to wait in line until you pick
up your goods and leave.
The lead time is difficult to measure
directly. In a supermarket, you could have
everyone measure their own waiting time.
For physical parts, however, someone would have to measure it. In reality, this is quite impractical.
The lead time, however, is an important value in manufacturing. A longer lead time means that you
will need more time to implement changes.

LittlesLaw
TheLaw
Littles Law is actually quite simple. There are three variables, often labeled as follows:
L Inventory, measured, for example, in units or quantity
Throughput, measured in units or quantity per time
W Lead Time, measured in time
Littles Law is then the very simple relation as shown below.

However, for sake of clarity I prefer to write it out in full. Hence:

Hence, to determine the lead time you calculate:

And finally, to determine the throughput you calculate:

TheUnderlyingAssumptions
Often in academia, you can find very boastful research results except if you read the assumptions
closely, you find out that it applies only to a very special and highly unrealistic situation. Quite
frequently, these limitations make the research results unusable in practice.
Littles Law, however, has only two major assumptions. First,you need to have a stable system
without major changes. In other words, the three variables involved (inventory, throughput, and
lead time) do not change significantly while being observed. Assume again you have a supermarket
with one cashier. Using Littles Law, you calculate the estimated waiting time based on the speed of
the cashier and the number of people in the queue. However, if a second checkout line is opened, the
speed of the system doubles. Hence, your calculation is no longer valid, since the system speed has
doubled. Similarly, if the queue gets longer because more people arrive than leave, then Littles Law
no longer gives the average waiting time. Therefore the arrival and the departure rates have to be
similar.

Second, the units used for the inventory, throughput, and lead time have to be consistent.
Measuring the throughput in batches per hour, the inventory in individual items, and the lead time in
days will mess your calculations up, unless you convert the values into consistent units.
In practice, however, both assumptions are very reasonable assumptions. First of all, most
manufacturing systems do not change drastically within a short time, even if you merely update the
values for the formula and get the new numbers. Regarding the units, basic knowledge of math and
common sense can easily avoid this problem. Therefore, Littles Law has an almost universal
validity and is highly applicable in practice!

WhatIsNotRelevant
The beauty of Littles Law are all the factors that do not matter. This universality makes Littles Law
extremely practical in everyday shop floor operations.
Random distribution of the arrival and the departure speeds (the throughput):
Regardless if you have normally distributed variables, exponentially distributed variables, or
any other random distribution, Littles Law holds true.
Sequence of the material processing: No matter if you have FiFo (First in First out), LiFo (Last
in First out), or any other or even a random sequence in your material flow, Littles Law is valid
to calculate the mean values! Of course, depending on your sequence, the fluctuation in
throughput time may be much more in LiFo than in FiFo, but the mean is correct.
Size of the observed loop: Again, it does not matter if you look at one machine, the complete
manufacturing line, the entire plant, or even your entire logistics network. Littles Law is valid!
Everything else you can think of: As long as the two conditions above hold true, Littles Law
is valid!

SomeExampleCalculations
Lets do some sample calculations. Assume
a supermarket checkout line. How long
does a customer have to wait at the
supermarket checkout for the following
example:
L: 5 customers waiting in line
: 2 customers leave the checkout
per minute

Calculate the waiting time

Hence a customer waits an average 2.5

minutes in line. Lets expand this for the
entire supermarket. How long does the average customer spend in the supermarket?Lets

assume:
L: 30 customers in the supermarket
: 2 customers leave the checkout per minute

Hence the average customer spends 15 minutes in the supermarket, of which he spends 12.5 minutes
shopping and 2.5 minutes at the checkout. If we observe the people more closely, we would also see
that 25 of them are shopping and 5 are waiting at the checkout.
Lets do a manufacturing example. What is the average
duration a part spends in the finished goods
warehouse (i.e., what is our reach on finished goods)?
L: 10,000 pieces are in the warehouse
: 15,000 pieces are sold per month

Hence the average piece spends two-thirds of a month in

the warehouse. Lets look at the lead time of the entire
material flow:
L: 15,000 units are in the system (of which 10,000
are in the warehouse, and 5,000 in various stages
of completion)
: 15,000 pieces are sold per month

Reach of a warehouse

Hence a part takes roughly 1 month to pass through the entire system. Now lets assume we have a
kanban system. How long takes a kanban to complete the loop? Assume one kanban represents
100 pieces, and there are in average 50 kanbans waiting for production.
L: 20,000 finished and semi-completed units and planned units in the form of kanban are in
the system (of which 10,000 units are in the warehouse, 5,000 are in various stages of
completion, and 5,000 are represented by 50 kanbans with 100 parts each)
: 15,000 pieces are sold per month

Hence it takes 1.33 months before a kanban completes an entire loop.

You can also use Littles Law for continuous processing as, for example, chemicals. Lets calculate
how long water stays on average in
Americas largest lake, Lake Superior,
before it leaves the lake.
L: 12,087.73 cubic kilometer (km3)
: Water outflow is adjusted and
varies throughout the season, but
lets assume it is 2,400 cubic meters
per second (m3/s), which is 75.68
km3 per year

160 years in average

Hence water stays in Lake Superior on average for almost 160 years before it flows out. More than
half of the water in the lake was already there when Abraham Lincoln was President
.

WhyItIsRelevant
Littles Law is almost always valid and very easy to calculate. It also shows the relation of the two
factors influencing the lead time: inventory and throughput. The graph below shows this relation in
relative terms.

Hence, if you want to reduce your lead time by half, you would have to either double your throughput
or halve your inventory. Both would achieve the same results. However, doubling the number of parts
produced in a given time is probably rather difficult and expensive in practice. Halving the inventory
is usually much easier. Besides, if you halve your inventory, you may even get money back by
temporarily selling more than you purchase or produce.
Therefore, Littles Law is another mathematical justification for the push in lean production to reduce
inventory, and the advantage of pull production and its fixed limit on WIP. But please, keep enough
inventory for your system to work smoothly, or it will be more expensive than before.
I hope this article was interesting for you and helps you with your daily work of improving your
system. Now, go out, calculate your lead time, and organize your industry!
PS: This is my 100th post on AllAboutLean.com. Thanks for reading, following, and commenting

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12 thoughts on A Eulogy for Littles Law

Pingback: A Eulogy for Little's Law | AllAboutLean.com | ...

June 30, 2015 at 12:26

Thanks, very useful your posts.

You are a leader!

ingfl

July 1, 2015 at 06:46

Hello ingfl, thanks for the praise

Christoph
Roser

July 4, 2015 at 10:36

Thanks a lot , very clear !

Sandro (Bologna, Italy)

sandro

July 4, 2015 at 11:08

Thank you, Sandro

Christoph
Roser

Pingback: A Eulogy for Little's Law | TLS - TOC, Lean &am...

August 23, 2015 at 04:25

excellent explanation. thanks.

Spyros
Bonatsos

August 27, 2015 at 16:00

Thanks for the post. Simple analogy helped to get it better.

Dhanesh

August 27, 2015 at 16:17

Thank you Spyros and Dhanesh

Christoph
Roser

September 13, 2015 at 08:52

So one question. If I reduce the lead time, can I assume I increase the throughput
and reduce the wip?

Leanlab
staff

In other words, if i do a Kaizen to improve the throughput Is the lead time

reduced?

September 13, 2015 at 21:15

Christoph
Roser

Lead time, throughput and WIP are directly correlated. If you change one, you also
change one or both of the other two. The usual way, however, is to reduce WIP in
order to improve the lead time while keeling the throughput constant.
Of course you can also do the approach you described by improving throughput.
However, this is often more difficult to do. Additionally, improving throughput also
has other effects, e.g. possibly putting supply and demand out of balance. The
parts will flow faster through your system and then pile up in front of the
customer. Hence you may have created a local improvement, but worsened the
overall situation. Happens way too often in manufacturing
Of course if your supply is unable to meet demand you should increase
throughput, although the improved lead time is in this case only a beneficial side
effect of your main target to deliver to the customer

January 29, 2016 at 18:02

Thanks a lot for this very nice explanation,

mohamedre
nshuu