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    1.3. Little’s Law

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    soumilidas91221

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    1.3. Little’s Law

    Uploaded by

    soumilidas91221
    1 views9 pages

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    Copyright:

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    1 views9 pages

    1.3. Little’s Law

    Uploaded by

    soumilidas91221

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    Little’s Law

    Outside a McDonald’s Outlet


    Clock time Arrival Cumulative Departure Cumulative
    (min) Arr. Dep.
    1 2 2
    2 0 2
    3 3 5
    4 0 5
    5 6 11
    6 0 11
    7 1 12
    8 3 15 4 4
    9 1 16 2 6
    10 2 18 1 7
    11 4 22 3 10
    12 2 24 0 10
    13 1 25 3 13
    14 3 28 2 15
    15 2 30 3 18
    16 1 31 1 19
    17 2 33 3 22
    18 2 35 1 23
    19 0 35 2 25
    20 1 36 1 26
    Cumulative Arrivals Vs. Departures
    Average Flow Time (FT) & Inventory (I)
    Little’s Law

    I = FR x FT

    I: inventory
    FR: flow rate
    FT: flow time
    Little’s Law: examples
    Visa Centre Wine MBA program Auto Garage

    Applications Bottle of wine Student Car

    Approved or rejected Number of bottles Graduating class Cars serviced per


    cases per cycle sold per year day

    Processing time Time in the cellar 2 years 6 hours

    Pending cases Content of cellar Total campus Inventory of cars


    population inside garage (WIP)
    Little’s Law: Simple Application

    COGS = $41.28 bill. COGS = $88.43 bill.


    Inv = $7.24 bill. Inv = $4.20 bill.
    Inventory turnover ratio Inventory turnover ratio
    = COGS/Inv = 6 = COGS/Inv = 21
    Days inventory Days inventory
    = 365/6 = 61 days = 365/21 = 18 days
    Inv. Carr. Cost = (24%/365).61 = 4% Inv. Carr. Cost = (24%/365).18 = 1.14%
    Try this out
    The primary goal of any supply chain for a product is to fulfil demand of the end customer.
    The chain consists of multiple firms – suppliers, manufacturers, distributers, retailers –
    through which material flows to the end customer to fulfil demand.
    Imagine this flow to be a big, long process.
    1. What do you think should determine the flow rate in this process?

    2. What happens when the flow rate is a) greater, b) less than the one stated in the
    previous question?

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