Operations
Little's law
Items in a system = arrival rate × time each item spends in it.
Last reviewedWhat does Little's law mean?
Little's law says that, in a stable system, the average number of items in the system equals the average arrival rate times the average time each item spends there. It works for queues, stock and orders. With 2,400 people in a queue and 1,200 people served per hour, a new arrival waits about 2,400 ÷ 1,200 = 2 hours.
Where does it come up in case interview prep?
- Supply chains explainedLesson in How industries work: the toolkit
- How hospitals and insurers make money: costs, unit economics and operationsLesson in Healthcare providers and payers
- Operations and process improvementLesson
- Non-standard and creative casesLesson
- Government and economic developmentLesson
- Healthcare and pharmaLesson
- Stretch case: operations to cost to organizationLesson in Integrated multi-part cases
- Logistics economics and operations: voyages, rerouting, warehouses and the last mileLesson in Logistics, shipping, ports and supply-chain services
Related terms
- BottleneckThe slowest step, which limits the output of the whole process.
- Capacity utilizationActual output as a share of the most that could be produced.
- Inventory turnoverHow many times stock is sold and replaced in a year.
- Landed costThe full cost of getting a product to your door, not just its purchase price.
- Cash conversion cycle (CCC)How many days cash is tied up between paying suppliers and collecting from customers.
- Service level (fill rate and OTIF)How reliably a supplier delivers what was ordered, measured by fill rate and on time in full.
- Bullwhip effectSmall changes in shopper demand grow into large swings in orders further up the supply chain.
- Safety stockExtra inventory held to protect against demand spikes or late deliveries.