The rate of outflow
As a company, you want to meet the customer demand. But how fast do you want to do so? You should have a vision and strategy based on the customer demand. Because, logically, customers do not like to wait. The question remains if you are able to satisfy enough customers per day, or even per minute? This is called the rate of outflow.
Calculation of the rate of outflow
Imagine twenty orders of three meals have been placed. The customers that have ordered those arrive one minute apart. This means, sixty meals should be prepared in the kitchen. However, customers do not want to wait any longer than twenty minutes; one would say the lead time is twenty minutes. The rate of outflow can be calculated by dividing the amount of work yet to be finished by the lead time. In this case, this would mean (60 (amount of meals))/ (20 (lead time)) = three meals per minute. The first three customers that have arrived, should wait twenty minutes. The customers that arrive later wait twenty minutes as well. But in the end, no customers will have waited longer than twenty minutes. This system is balanced out! However, when customers arrive whose lead time is no longer than ten minutes, the system does not apply anymore.
It often takes up to six weeks to gain a license from the township. On average, there are sixty applications to process. The rate of outflow would therefore be 60/6 = 10 licenses per week. But imagine citizens agreeing with three weeks per license. What would the township do? They adapt their processes to satisfy their customers. This means the rate of outflow would then be 60/3 = 20 licenses per week, which means it has doubled! The law that we have used twice up until now is called Little’s Law. John Little was an American who proved this law in 1961. He is considered the founder of the science of marketing.