Littles Law Flashcards
LITTLES LAW
I = R x T
Everything has to be in Hours. R and T has to be in hours
Muchas veces se tendra q transformar en horas
I
Average Inventory. Number of people, items in the process
R
Average Througput rate. Process time rate at which items are going through the system. COGS
T
Average Flow Time. Time it takes or spent. Time inventory is hold.
LITTLE LAW INSIGHTS
Average throughput rate, flow time and inventory are related. You can influence any of these by controlling the other two.
ASSUMPTIONS
No waste in the system. If a unit flow enters the process, then it completes the process. Stable process.
STABLE PROCESS
The long term average input rate equals to the long term average throughput rate.
INVENTORY TURNOVER
The number of times inventory is replaced in a year
DAYS OF INVENTORY
The number of days inventory stays on the shelf. FLOW TIME
COST OF GOODS SOLD
Expenses allocated to make the output. THROUGHPUT RATE
DAYS OF INVENTORY FORMULA
COST OF INV/ COGS
AVERAGE INVENTORY
Area Under the Curve/ Number of Intervals
SLOPE
Input rate - Capacity Rate
INVENTORY BUILDUP RATE
Rate at which inventory accumulates in a system when the input rate (arrival of items) exceeds the capacity rate (processing or departure of items).
Inventory Turnover and LItlles Law
You can find inventory turnover using Littles Law.
Days of Inventoey - (T)
Inventory Turnover - (I)
Costs of Goods Sold - (R)
Days of Inv
Costs of Inv / COGS
INVENTORY TURNOVER FORMULA
12/T months
Units are in the system on average
Find inventory with the help of Littles Law
