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Operations Management
Littles Law - Lecture 3
(Chapters 3 and 4)

Dr. Ursula G. Kraus
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Review
Shouldice Hospital (Focused Factory)
Process View of Operations
Product/Process Attributes
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Agenda
Process Characterization
- By Architecture
- By Positioning Strategy
- By Customer Interface
Operational Measures:
Time, Inventory and Throughput
Littles Law
Flow Time Analysis
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Process Types Examples .
Project Construction, Consulting
Job Shop Machine Shop, Beauty Shop
Batch Bakery, Classroom
Line Flow Assembly Line, Cafeteria Line
Continuous Flow Paper mill, Central heating
Classification of Processes by:
I. Process Architecture
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Characteristics of Processes:
Job Shop vs. Flow Shop
Type of
Process
Product
Volume
Specialized
Equipment
Product
Variety
Setup
Frequency
Labor
Skills
Variable
Cost

Job Shop


Flow Shop



Source: Managing Business Process Flows (1999)
low
medium
high
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Process
Flexibility
Jumbled Flow.
Process segments
loosely linked.
Disconnected Line
Flow/Jumbled Flow
but a dominant flow
exists.
JOB SHOP
(Commercial Printer,
Architecture firm)
BATCH
(Heavy Equipment,
Auto Repair)
LINE FLOWS
(Auto Assembly,
Car lubrication shop)
CONTINUOUS
FLOW
(Oil Refinery)
Product
Variety
Low
Low Standardization
One of a kind
Low Volume
Many Products
Few Major Products
High volume
High Standardization
Commodity Products
Connected Line
Flow (assembly line)
Continuous, automated,
rigid line flow.
Process segments tightly
linked.
High
Low
High
Product-Process Matrix
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Classification of Processes by:
II. Positioning Strategy
Functional Focus:
grouping by resource type
Job shop
General purpose resources

Product Focus:
grouping by product
Flow shop
Specialized resources

A B
C D
Product 1
Product 2
A D B
C B A
Product 1
Product 2
= resource pool (e.g., X-ray dept, billing)
Source: Managing Business Process Flows (1999)
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Classification of Processes by:
III. Customer Interface
Make to Stock
Make to Order
Source: Managing Business Process Flows (1999)
For
Mr. Foley
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Self-service groceries
Automobile
Comparison of Goods and Services
100% 75% 50% 25% 0% 100% 75% 50% 25%
Goods
Services
Installed carpeting
Haircut
Consulting services
Fast-food restaurant
Gourmet restaurant
Auto maintenance
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Characteristics of Services
Typically labor intensive
- difficult to automate

Frequently individually processed
- low scale economies

Often an intellectual task performed by
professionals
- expensive resources and variable output

Often difficult to evaluate for quality
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Agenda
Process Characterization
Operational Measures:
Time, Inventory and Throughput
Littles Law
Flow Time Analysis
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Business Process Flows
Movement of flow units through a network of activities
where resources transform inputs into outputs.
Inputs Outputs
Information
Network of
Activities and Buffers
Resources
Process
Management
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Definition: Process Flow Measures
Flow Time (T): The average time a job spends in
the process
Inventory (I): The average number of jobs
accumulated in the process
Throughput, or Flow Rate (R): The average rate
at which jobs flow through a process (units/time)

Turnover: The ratio of throughput to average
inventory (inventory turn)
Capacity: The largest sustainable flow rate
possible
Source: Managing Business Process Flows (1999)
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Agenda
Process Characterization
Operational Measures:
Time, Inventory and Throughput
Littles Law
Flow Time Analysis
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Littles Law
relating process flow measures
Inventory = Throughput x Flow Time
I = R x T

Turnover = Throughput / Inventory = R/I
= 1/ T
Inventory I
[units]
Flow rate or Throughput R
[units/hr]
... ... ... ... ...
Flow i[hrs]
Source: Managing Business Process Flows (1999)
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Material Flow: Bakery
We are a bakery that specializes in making bread. We bake our bread
in batches of 100 loaves at a time. The typical inventory of bread in
our bakery is 9 batches and we produce an average of 100 loaves per
hour.

What is the average flow time
of a batch of bread?

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Process Flow Examples
(1) Material Flow: A fast-food restaurant processes an average of 5,000 lb. of
hamburgers per week. The typical inventory of raw meat is 2,500 lb. What
is the average hamburgers flow time and the restaurants turnover?



(2) Customer Flow: The above fast-food restaurant processes on average 1,500
customers per day (15 hours). On average there are 75 customers in the
restaurant (waiting to place the order, waiting for the order to arrive, eating
etc.). How long does an average customer spend at the restaurant and what
is the average customer turnover?

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Process Flow Examples
(3) J ob Flow: A branch office of an insurance company processes 10,000
claims per year. The average processing time is 3 weeks. Assuming 50
weeks in a year, what is the average number of claims in process.




(4) Cash Flow: A major manufacturer sells $300 million worth of cellular
equipment per year. The average accounts receivable in the cellular group
is $45 million. What is the average billing to collection process flow time?

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Process Flow Examples
(5) Material Flow: A general manager at at a pharmaceutical company states
that her inventory turns three times a year. She also states that everything
that the company buys gets processed and leaves the docks within six
weeks. Are these statements consistent?



(6) Shouldice Hospital: Shouldice performs 137 surgeries per week, and the
average patient stays 4 days. There are 125 regular hospital beds, and 12
pressure sensitive beds for patients susceptible to bed sores. What is the
average number of beds occupied at Shouldice?

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Process Flow Examples
(7) AI MD: The AIMD (Aircraft Intermediate Maintenance Division) onboard
USS Roosevelt has an average of 13 hydraulic actuators awaiting repair at
any given time. Last year, they repaired 156 actuators.

a) What is the flow time for hydraulic actuators at AIMD?



b) If the AIMD could cut flow time by 10%, by how much would the
average inventory go down?
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Process Flow Examples
(8) NADEP: The F-18 Repair shop at NADEP JAX (Naval Aviation Depot,
Jacksonville) repairs engines in an average 86 days. They receive (and
ship) an average of 30 engines per month.
a) What is the average number of engines at the NADEP?


b) At $3 million per copy, what is the value of the inventory?


c) By how much would the value of inventory decrease if NADEP could
cut T by 1 day? 2 days? 30 days?
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Littles Law -- Caveats
Applies to the long run average of a stable system
In any given time period (sample) the average may be different
(especially for small samples)
In an unstable, or dynamic system, the average may not be very useful

In systems with variance, we often need to know about more
than the average
Fast Food Example (2) (what does Littles Law tell us? Is that enough?)
More in chapter 8

Source: Ken Doerr, NPS 2002
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Agenda
Process Characterization
Operational Measures:
Time, Inventory and Throughput
Littles Law
Flow Time Analysis
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Process Flow Measures
Flow Time (T): The average time a job spends in the
process
Inventory (I): The average number of jobs
accumulated in the process
Throughput, or Flow Rate (R): The average rate at
which jobs flow through a process

Littles Law
I = R x T
Source: Managing Business Process Flows (1999)
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Why Flow Time (T) Matters
Reduced manufacturing flow time means
short delivery response time
reduced inventory (Little's Law) which in turn lowers cost
production closer to time of sale which increases (demand)
predictability
fast feedback on quality problems
Reduced development flow time means
quicker time to market (resulting in larger market share)
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Example: ZARA (Inditex)
possibly the most innovative and
devastating retailer in the world
(Daniel Piette, Louis Vuitton - Fashion Director)
Source: Business Week, 4 April, 2006
Two weeks to develop a new product and get it to stores
(9-month industry average)
10,000 new designs each year
Only limited production in low-cost countries
Zero advertising

World's fastest growing retailer (3,100 stores, 70 countries)
32,000 employees and 200 fashion designers
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0 10 20 30 40 50
GM
Ford
Honda
Toyota From
concept
approval to
production
Months
Company
46
37
36
27
Mean Development Time
Importance of Short Development Times
Source: Operations Management, NPS 2003
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Average Flow Time consists of

Theoretical Flow Time
(Processing Time)
+

Waiting time
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Process Flow Chart
is the visual representation of a business process
showing major activities and their inter-relationships.
Inputs Outputs
Information
Network of
Activities and Buffers
Resources
Process
Management
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Operational Measures Flow Time
Activity Time, or Cycle time: Is the time required by a
typical flow unit to complete an activity once
(Theoretical) Flow Time: Min. time required for
processing a typical flow unit through the whole process
without any waiting
Critical Path: A sequence of activities that takes the
longest total (flow) time for completion
Critical Activities: All activities on a critical path

Flow Time Efficiency =
Source: Managing Business Process Flows (1999)
Time Flow Average
Time Flow l Theoretica
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Agenda
Process Characterization
Operational Measures:
Time, Inventory and Throughput
Littles Law
Flow Time Analysis
- Critical Path Identification
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Critical Path Example:
Pusan Port (Korea)
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Critical Path - Definitions
Critical path consists of all activities that have a
slack time of zero
Slack Time = LST - EST = LFT - EFT

EST: Earliest Start Time
EFT: Earliest Finish Time
LST: Latest Start Time
LFT: Latest Finish Time
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Critical Path - Algorithm
A. Visit all activities from start to finish
1. EST(first activity) = 0
2. EFT = EST + activity time
3. EST(max EFT of all predecessors)

B. Now visit all activities from finish to start
LFT(final activity) = EFT (final activity)
1. LST = LFT activity time
2. LFT = (min LST of all successors)

C. Calculate Slack Times = LST - EST = LFT - EFT



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Critical Path Example:
Project Scheduling
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Complex Example