Measuring production performance with Little's law:the connection between inventory throughput , and cycle time
Little’s Law is a mathematical formula that relates the average inventory in a system, the average throughput, and the average cycle time of the system. It states that the average inventory (I) in a production system is equal to the average throughput (T) multiplied by the average cycle time (CT):
I = T * CT
The average inventory refers to the amount of work in progress or unfinished items that are present in the system at a given time. The average throughput is the number of items that pass through the system over a given period of time, and the average cycle time is the amount of time it takes for an item to pass through the entire system from beginning to end.
Little’s Law is commonly used in the field of operations management to help understand and optimize production systems. By using Little’s Law, managers can measure the efficiency of a system and determine if changes need to be made to improve the system’s performance.
For example, if the average inventory in a system is high, but the average throughput and cycle time are low, Little’s Law can be used to determine the cause of the high inventory and to suggest corrective actions. The result of Little’s Law can be used to determine the ideal balance between inventory, throughput, and cycle time in order to optimize the production system.