I’m surprised at myself that I’ve never written about Little’s Law. It’s one of those things we lean geeks love to trot out to show that…we’re lean geeks.
This article gives a quick background of Little’s Law. As the article says, Little’s Law (and equation) has been translated to the manufacturing setting thus:
Work In Process (WIP) = Throughput X Cycle Time
In the lean world, WIP is not to be desired (after a point). On the other hand, Throughput is desired. The problem, hidden within this formula, arises when managers seek to improve throughput (i.e., efficiency, productivity) in isolation of the other two variables. If I improve throughput, say with new automation, WIP will go up, everything else being equal. Now, here’s where things get tricky…as WIP goes up, cycle time won’t necessarily stay the same. Increased WIP could cause increased cycle time. (More WIP means more material sitting behind the more efficient steps in the process, so the cycle time goes up.) This further increases WIP which further increases cycle time. In this case, the “improved efficiency” is a false economy. The company pays for the “increased efficiency” with increased WIP.
Traditional lean (“lean reduces waste and cuts costs”) tackles this problem by limiting WIP (kanban). Reducing WIP leads to reduction in cycle time (stuff isn’t sitting in front of or behind process steps as long). But it can also lead to decreased throughput in a highly variable process.
Agile manufacturing, on the other hand, looks at the equation from a bit of a different angle. Agile manufacturing sees everything from the customer’s point of view: Are customers getting what they want, how they want it, when they want it, each time, every time, forever? They are most interested in cycle time. The agile focus, then, is on shorter cycle times, i.e., greater velocity of material through the process. Shorter cycle times are achieved by removing process variability: errors, scrap, delays, variable change over times, unpredicted breakdowns, etc. Reduced cycle time allows for increased throughput while holding WIP constant.
Does that mean the agile view doesn’t see WIP as important? Not at all. Remember, WIP and cycle time are tied together, so one of our cycle time reduction methods is careful management of WIP. We manage and adjust the WIP buffers to assure smooth flow between two process steps that have different rates of production or are highly variable.
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