Back to Volume 2 | Summer 2017

Technical Tutorial: Optimal Level of WIP in a Production System

Executive Summary

In the previous edition of the Journal, we featured a tutorial article on Little’s Law, which is a fundamental relationship between Throughput (TH), Cycle Time (CT) and Work-In-Process (WIP). These core variables characterize all production systems, including those that are contained within capital projects. A naïve interpretation of Little’s Law frequently leads those new to operations science to infer that one need only increase WIP to arbitrarily high levels in order to increase throughput to whatever target level is desired. While Little’s Law is generally true under very broad assumptions, it cannot automatically be treated as if independently selecting and altering any two of the variables (Throughput, WIP and Cycle Time) will set the third variable at a desired target. Real production systems always have other physical constraints that place upper limits on Throughput and lower limits on Cycle Time. Using some simple examples, we will explain how physical constraints manifest themselves in limiting the range of feasible values that Throughput, Cycle Time and WIP can achieve. We will also discuss the important concept of Critical WIP, the minimum WIP level necessary to achieve the maximum Throughput in a production system, wherein there is no variability. We then conclude with a qualitative discussion about how variability affects system performance, as well as its effect on the optimum level of WIP needed to achieve desirable Throughput and Cycle Time performance.

Figure 2: Example Production System with 4 distinct operations

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