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    Little's Law Example Question: Inventory Management

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    Gaurav
    The document summarizes an example of applying Little's Law to an inventory management problem. It describes a company that manufactures digital cameras through a 3 stage process taking 20 total hours. The company produces 1000 cameras per day with a 10 hour work day. Currently there is 3000 units of work-in-process (WIP) inventory across the three stages. Consultants have suggested reducing WIP by 50% but Little's Law calculations show the minimum possible WIP for the current throughput rate and process times is 2000 units.

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    Little's Law Example Question: Inventory Management

    Uploaded by

    Gaurav
    20 views2 pages
    The document summarizes an example of applying Little's Law to an inventory management problem. It describes a company that manufactures digital cameras through a 3 stage process taking 20 total hours. The company produces 1000 cameras per day with a 10 hour work day. Currently there is 3000 units of work-in-process (WIP) inventory across the three stages. Consultants have suggested reducing WIP by 50% but Little's Law calculations show the minimum possible WIP for the current throughput rate and process times is 2000 units.

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    Littles Law Example

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    The document summarizes an example of applying Little's Law to an inventory management problem. It describes a company that manufactures digital cameras through a 3 stage process taking 20 total hours. The company produces 1000 cameras per day with a 10 hour work day. Currently there is 3000 units of work-in-process (WIP) inventory across the three stages. Consultants have suggested reducing WIP by 50% but Little's Law calculations show the minimum possible WIP for the current throughput rate and process times is 2000 units.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    20 views2 pages

    Little's Law Example Question: Inventory Management

    Uploaded by

    Gaurav
    The document summarizes an example of applying Little's Law to an inventory management problem. It describes a company that manufactures digital cameras through a 3 stage process taking 20 total hours. The company produces 1000 cameras per day with a 10 hour work day. Currently there is 3000 units of work-in-process (WIP) inventory across the three stages. Consultants have suggested reducing WIP by 50% but Little's Law calculations show the minimum possible WIP for the current throughput rate and process times is 2000 units.

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    Inventory Management

    Little’s Law Example Question

    A company makes digital cameras


    ▪ The process has 3 stages: manufacture, assembly and packaging
    ▪ 20 hours for 1 unit to pass from start to finish through the processes
    ▪ A work day is 10 hours
    ▪ Average output is 1000 cameras / day
    ▪ Current WIP levels are 3000 unit (for all 3 processes combined)
    ▪ Some consultants hired by the owner suggest that WIP should be reduced by 50%....

    What do you think? L=λW


    L=λW
    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)

    Answer on next page

    Course Handout
    Inventory Management

    L=λW
    λ = 1000 cameras / day
    W = 2 days (20 hours / 10 hours in a day)
    L = 1000 x 2
    L = 2000 units

    2000 units is the “minimum” WIP possible for this system to be functioning based on the
    given process times and throughput rate. The extra 1000 WIP in existence must be waiting
    between processes.

    “Choosing” to cut WIP in half is not possible but a deliberate reduction in either throughput rate
    (unlikely) or a reduction in throughput time (lead time reduction).

    Course Handout

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