MGMT 361: Operations Management Notes

Operations Management: Little's Formula and Inventory Management

Little's Law

• Definition: Little's Law relates the average number of items in a stable system to the average arrival rate and the average time an item spends in the system.

• Condition: It applies to demand-constrained processes ( \text{demand rate} \leq \text{capacity} ).

• The Three Measures:

  • Work-In-Process (WIP): Average flow units in the process.

  • Flow Time (FT): Average time a flow unit spends in the process.

  • Flow Rate (FR): Average rate at which flow units move through the process.

• Formula: \text{WIP} = \text{FT} \times \text{FR} .

Examples of Little's Law Application

• Little's Law is applied to calculate average time spent (Flow Time) in scenarios like Burger King and the number of items (WIP) in processes such as insurance claims.

• A Purdue University example highlights that not all given metrics directly translate to a typical Little's Law application for every requested calculation, requiring careful identification of relevant flow units.