CHAPTER 4
Little’s Law
What is the reason that we reduce inventory? It is to make the finances easier.
For example, what if 500,000,000 yen of work in process and inventory was reduced and this 500,000,000 yen was in the accountant’s safe? The accountant could invest this money … and we could make a profit of several percent from this … But when this money is on the gemba in the form of materials, we now have to borrow money.
Little’s Law links the throughput rate, inventory, and flow time (i.e., the time a specific unit needs to flow through the process). It explains that for a given throughput rate, a manager can only decrease the amount of time it takes for a unit to go through the process from the start to the end by ...
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