Back to Volume 1 | Winter 2016

Little’s Law – A Practical Approach to Understanding Production System Performance

Executive Summary

Since it was first published over 50 years ago, Little’s Law has been applied, with great success, to numerous fields such as telecommunications networks, retail supply chain management, logistics and manufacturing. But is it applicable to project delivery? If so, how can we benefit from its use? In this short tutorial we explain the application of Little’s Law to the delivery of capital projects. Little’s Law provides insight into how increasing work-in-process (WIP) has a detrimental impact on cycle time. This is counterintuitive to common practice in conventional project management, where the belief is that increasing WIP will increase throughput and ‘get more things going.’

Little’s Law describes the relationship between 3 fundamental parameters of any production system – the cycle time, throughput and WIP. Consider for instance, the production system or process shown in Figure 1, where items or units are flowing through the system as inputs and are then transformed by the system into outputs.

Figure 1: High-level Depiction of a Production System

This illustrates a continuous process flow, where input items are continuously being transformed by the notional production system into outputs, with the system in steady state operating over many cycles. A simple example might be a single step in any manufacturing process, such as when individual sheets of paper are assembled together into packages of paper. In the context of capital projects, an example might be the sequence of activities needed to develop an onshore field: for instance, engineering > fabrication > delivery > installation or site construction > drilling > completions > flow back.

In production systems, such as those of capital projects, where multiple production units follow each other (engineering > fabrication > delivery > installation or site construction > drilling > completions > flow back), variability that is generated by one process propagates through the system. If utilization of all production units is high in order to minimize resource cost (as is often the case, though not necessarily the best strategy), process variability will also be high. To remedy this, one has to institute standard processes within the project by working with those that are directly responsible for the work to determine the norm, and use production plans as a control mechanism to achieve high reliability.

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