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Little’s Law and flow efficiency

Enter inventories between steps, process times and throughput to see the real lead time, how much of it adds value and how much cash comes back by leaning the flow, without buying machines.

Pre-sizing and estimating tool: results do not replace design, calculations or reports signed by a licensed professional, nor verification against the applicable codes and standards.

Preliminary estimate
Value stream map (0 = no step)
More than 6 steps? Paste the list from Excel

One row per step: name (optional), WIP before the step (parts) and process time (min/part).

See what was read

Process time: time in which the part is actually transformed at each step (value-added). WIP: parts waiting before the step, counted on the floor.

Flow
Capital in process
Economic analysis
—Lead time and flow efficiency
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Value stream timeline

Waiting before each step (days, from Little’s Law) and process time (barely visible at this scale).

Tap the chart to see the values.

Lead time versus work-in-process

Factory Physics best case and practical worst case; the dot is the current line and the diamond the proposal.

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Project payback

Cash flow of the improvement: investment in year 0 and annual savings escalated at the rate entered, discounted at the MARR.

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The report gathers this page's inputs, results, equations, assumptions and references, with fields for project, engineer and revision. In the print dialog, choose Save as PDF.

Method, assumptions and references

Equations used

Little’s Law: lead time = WIP ÷ throughput
Flow efficiency = value-added time ÷ (lead time + value-added time)
Factory Physics: rb = 60 ÷ longest process time; T0 = Σ times; W0 = rb · T0
Best case: LT = max(T0, W ÷ rb); practical worst case: LT = T0 + (W − 1) ÷ rb
Capital freed = ΔWIP × part value; annual savings = capital freed × holding cost

Assumptions and limits

  • Steady state: throughput holds when WIP is reduced, as long as WIP stays well above critical WIP.
  • One machine per step; with parallel machines, divide process time by the number of machines for the bottleneck calculation.
  • Freed capital is a one-off cash gain; the annual savings enter the project cash flow.

Standards and technical documents

  • Little, J. D. C. A proof for the queuing formula L = λW. Operations Research 9(3), 1961
  • Hopp, W. J.; Spearman, M. L. Factory Physics, 3rd ed. Waveland, 2011
  • ISO 22468:2020: Value stream management (VSM)
  • Rother, M.; Shook, J. Learning to See. Lean Enterprise Institute, 1999

U.S. regulations

  • ASC 330 (Inventory): measurement of work-in-process at cost
  • IRC §263A (UNICAP): capitalization of production costs into inventory for tax purposes

Frequently asked questions

What does Little’s Law say?

That work-in-process equals throughput times lead time. With 5,900 parts in process and 900 leaving per day, lead time is about 6.6 days, even though each part is worked on for less than 4 minutes.

Does cutting inventory always cut lead time?

Yes, as long as throughput holds. If WIP drops below what is needed to feed the bottleneck (near critical WIP), throughput falls and the gain disappears.

What is a good flow efficiency?

Traditional plants are often below 5%. Well implemented cells and continuous flow reach 25% or more.