Definition of Little’s Law:
Any Lean journey strives to minimize waste and increase speed. Increasing speed equates to reducing lead time to your customers. Minimizing waste includes an analysis of inventory on-hand and steps to reduce that inventory. Little’s Law provides an equation for relating Lead Time, Work-in-Process (WIP) and Average Completion Rate (ACR) for any process.
Named after the mathematician who proved the theory, Little’s Law states: Lead Time = WIP (units) / ACR (units per time period)
Knowing any two variables in the equation allows the calculation of the third. Reducing WIP while maintaining the same ACR reduces lead time. Similarly, improving the process to increase ACR while maintaining the same WIP also reduces Lead Time. This applies to any process – manufacturing, transactional, service or design.
If it is difficult to relate WIP to a given process, try using TIP instead (Things-in-Process). For example: A quoting department can complete 4 quotes per day (ACR), and there are 20 quotes (TIP) in various stages in the department. Applying Little’s Law = Lead Time = TIP/ACR = 20 quotes/4 quotes/day = 5 days.
Therefore, without changing the process, inventory or priorities – or accounting for variation – any new quote coming into the department could reasonably be expected to be completed in 5 days.