WIP = Lead Time x Throughput

Why Work in Progress kills your lead time and productivity

Every factory needs work in progress to keep running effectively but at a recent seminar my colleague from ICE Sean Meeghan & I spent some time discussing its effects on factory performance.

There is a maxim borrowed from queuing theory that the more people in a queue the longer it will take the person to get served. No surprises there and we have all experienced it at Airport Security or the supermarket check out.

But the same is true in factories – the more work in progress (WIP) you have, the longer will be your lead time – doesn’t seem right?

Look at it like this:

Works order launch

The more water there is in the bath (WIP) the longer new water will take to come out. Screenshot 2016-01-15 18.27.18

If you think about as an equation then it looks like this:

WIP = Lead time x Throughput

If we use numbers and say for example

WIP = 20
ThroughputLeadtime = 2
Throughput = 10

It looks like this: 20 = 2 x 10

If you want to reduce lead times to 1 and throughput stays the same then WIP must reduce to 10 to make the equation work: 10 = 1 x 10

Going the other way round if you increase throughput you must reduce WIP to keep lead times the same.

This makes more sense as we all know that when a factory is quiet lead times drop, when we are busy lead times increase.

I will let the accountants tell you about the cash implications of WIP but there is more to worry about than that:

High WIP reduces productivity!

Here is a list of activities that go on in a factory:

Activity More WIP will
Looking for a batch Increase the time required to find things
Moving batches around Batches will have to be moved out of the way
Machine run interruptions Long runs will be interrupted to make urgent orders
Number of changeovers Number of changeovers will go up because of more interruptions
Quality Yield More setups means more setup scrap
Scheduling complexity More batches makes knowing what to do next harder
Sales office productivity Relationships are damaged as delivery promises are broken
Customer relations Suffer because delivery promises are broken

There are so many temptations to keep pushing new batches into the factory as orders increase but as we can see from above it often actually makes things worse.

Increasing WIP can sometimes improve available capacity as there will always be something else to work on if something goes wrong. But this is often an illusion and a use of the wrong local measures. The Theory of Constraints tells that individual machine or person productivity is less useful and often down right bad compared to total factory productivity measures.

There is one circumstance when reducing WIP will have no effect on lead time but I have only come across it once. It was a single step process – machining a special nut from stainless steel on a single machine and monthly demand was many multiples of capacity.
The business had a monopoly of supply so customers just had to wait.

This was a special case because the bottle neck was at the start of the process and secondary operations were trivial.

So if you are under pressure to reduce lead times you must reduce work in progress.

In the next article I will suggest some ways of doing just that.