# WIP Cash Tied Up Calculator Using Little's Law

> Source: https://netray.co/tools/wip-cash-tied-up-littles-law-calculator
> Publisher: Netray (netray.co), AI and integration engineering for ERP and manufacturing systems.
> Section: Free Tools

## Short answer

Estimate how much cash sits in work in process from output rate and flow time, and what a shorter flow time would release.

## Category

mes-shop-floor

## Audience

- Operations manager
- Owner
- Lean practitioner

## Tool

**Kind:** calculator

**Currency:** $

**Inputs:**

#### Finished units per week

**Key:** weekly_output

**Type:** number

**Default:** 400

**Min:** 0

**Step:** 10

**Unit:** units

#### Working days per week

**Key:** week_days

**Type:** number

**Default:** 5

**Min:** 1

**Max:** 7

**Step:** 1

**Unit:** days

#### Average flow time, release to finish

**Key:** flow_days

**Type:** slider

**Default:** 12

**Min:** 1

**Max:** 60

**Step:** 1

**Unit:** working days

#### Average value per unit in process

**Key:** wip_value

**Type:** number

**Default:** 85

**Min:** 0

**Step:** 5

**Unit:** $

**Help:** Material plus labor added so far, usually 50 to 70 percent of finished cost.

#### Cost of capital and carrying

**Key:** capital_rate

**Type:** number

**Default:** 14

**Min:** 0

**Max:** 50

**Step:** 1

**Unit:** %/yr

#### Target flow time reduction

**Key:** target_cut

**Type:** slider

**Default:** 30

**Min:** 0

**Max:** 80

**Step:** 5

**Unit:** %

**Outputs:**

#### Throughput per working day

**Key:** daily

**Expr:** weekly_output / week_days

**Format:** decimal

#### Average units in process

**Key:** wip_units

**Expr:** daily * flow_days

**Format:** integer

**Description:** Little's Law: WIP equals throughput times flow time.

#### Cash tied up in WIP

**Key:** wip_cash

**Expr:** wip_units * wip_value

**Format:** currency

**Primary:** true

#### Annual carrying cost of WIP

**Key:** carry

**Expr:** wip_cash * capital_rate / 100

**Format:** currency

#### Cash released by target reduction

**Key:** cash_freed

**Expr:** wip_cash * target_cut / 100

**Format:** currency

**Primary:** true

#### New flow time

**Key:** new_flow

**Expr:** flow_days * (1 - target_cut / 100)

**Format:** days

**Chart:**

#### Cash tied up in WIP vs flow time

**Type:** line

**X:** flow_days

**From:** 1

**To:** 60

**Steps:** 30

**Series:**

- wip_cash

**Disclaimer:** Little's Law holds for stable averages over a period. Use averages from a normal month, not a peak.

## Content

**Intro:** Work in process is cash sitting on the shop floor. Little's Law links WIP, throughput and flow time so a small plant can estimate that cash without counting every pallet.

**Sections:**

#### How to use it

**Body:** Enter average weekly finished output and the days an order spends from release to finished. If you do not know flow time, take a sample of recent orders and average the elapsed time between release and completion. Use the average value of a unit in process, not the sales price. Then set a target reduction to see the cash released.

#### Little's Law

**Body:** The law states that average work in process equals average throughput times average flow time. Throughput is output per working day, flow time is working days in the system. Multiply the resulting units by average value to get cash. The relationship is linear, so cutting flow time by 30 percent cuts WIP and the cash it holds by the same share.

**Bullets:**

- Flow time includes waiting, not just machining
- Most flow time in small plants is queue
- Releasing less work often does more than working faster
- Smaller batches shorten flow time

#### Reading the result

**Body:** The chart shows how fast cash grows with flow time at constant output. Plants that take 20 days to make parts needing 2 days of touch time are carrying roughly ten times the WIP they need. Share the numbers with the shop: they make the case for pull release, kitting and finite scheduling.

#### Common mistakes

**Body:** People mix calendar and working days, use selling price for value, or measure flow time only on fast jobs. Avoid including finished goods or raw stock in the unit count: this tool covers only the time between release and completion.

**Cta:** Netray can read released and closed production orders from your ERP to compute actual flow time and WIP per product family.

**Faq:**

#### Does Little's Law need steady production?

**Answer:** It holds for long run averages when the system is stable, meaning the amount entering roughly equals the amount leaving. Use a representative month rather than a surge or a shutdown period.

#### What value per unit should I use?

**Answer:** Use the average cost accumulated at the point of each unit in process: material plus labor and overhead applied so far. As a rule of thumb that is often half to two thirds of the finished unit cost.

#### How do I shorten flow time?

**Answer:** Reduce queue time first: limit work released, break large batches into smaller transfers, level load across work centers and clear bottlenecks. Faster machines rarely help if jobs wait most of the time.

#### Can I use calendar days?

**Answer:** Only if throughput is also per calendar day. Mixing the two is the commonest source of error, so keep both in working days as the inputs suggest.

## Search terms

wip inventory calculator, littles law manufacturing, work in process cash calculator, reduce wip inventory, flow time calculator, wip value calculation, manufacturing lead time and wip

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