Little's Law - How to Calculate WIP, Lead Time and Throughput Rate | Must-Know for Managers!
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Little's Law is a formula showing the relationship between the number of units or inventory items in a system to the throughput rate (quantity of units being processed per time period) and the throughput time (the time it takes for a unit to pass through the system).
L = λ W
W = L/ λ (same formula re-arranged)
L = Level of WIP (Min. Qty of items in the system at any moment in time)
λ = Throughput Rate (Qty of items going through the system per time period)
W = Throughput Time (Average time an Item spends Inside the system)
It's an incredibly powerful, simple, and insightful formula that allows us to understand the potential of a system and the consequences of making potential changes.
It's equally relevant to a production line in a factory, the passing of patients through a hospital, or planes through an airport or service tickets for an IT helpdesk. Any stable system until flowing through it at a steady rate can be analyzed at a high level using the help of Little's Law.
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