BE1401 Business Operations and Processes

Exercises on Little’s Law

1. Managing our email is a common and time-consuming daily activity. For many it is
hard to keep up with the volume of messages, let alone provide timely responses.
A student Sue might receive 50 messages each day to which she must generate a
response. Can we easily assess how well she handles her email duties? Suppose
Sue follows the “Zero Inbox” policy and removes a message from her Inbox once
she has responded to it. Then the remaining messages in her Inbox are the
messages waiting to be answered. Over the last semester, the size of the Inbox has
varied between one and two hundred messages with an average of 150 messages.
Can we estimate how long it takes Sue to answer a message on average?

I (150 messages) = R (50 message/day) x T

T = 3 days

2. You plan to sell your flat and wonder how long it will take to unload your
property. Your agent tells you about 100 days. You decide to check it out yourself.
First, you observe from monitoring the classified ads that over the past year the
number of flats for sale in your district has ranged from 20 to 30 at any point in
time, with an average of 25. From annual statistics, you managed to obtain an
average of 75 flats sold per year. Is your agent overstating or understating the
expected duration to sell your flat?

I (25 flats) = R (75 flats sold/year) x T

T = 0.333 years = 121.66 days (understating)

3. A major manufacturer sells $300 million worth of cellular equipment per year.
Average amount in accounts receivable is $45 million. What is the average elapse
time from the time a customer is billed to the time payment is received?

I ($45m) = R ($300/year) x T
T = 0.15 years = 54.75 days

4. Lone Star Insurance Co (LSI) specializes in automobile insurance business. The

management of its claims department is preparing operating plans for the next
year, particularly the ideal staffing level for claims representatives (who are called
"claims reps" for short). Based on the past and the planned future sales of
insurance policies, LSI forecasts the new claims arrival rate to be about 10,000
claims per quarter during the next four quarters (i.e. one year). The claims
department has determined that a claims rep needs to perform four hours of
claims handling work per claim to close a claim. The average age of a claim at
closing is estimated to be six months (i.e. two quarters). Studies also indicate that
a claims rep can effectively perform (after adjusting for lunch and other breaks,
administrative meetings, etc.) about 400 hours of claims handling work per
quarter. The company desires to achieve a claims’ closing rate that is equal to the
new claims arrival rate (i.e 10,000 claims per quarter).

a. What average level of pending claims (i.e. number of open claims) may LSI
 expect at any point in time during the coming year? Explain. (Please note that
this is an ongoing, not a startup, operation.)

I = R (10000 claims/quarter) x T (2 quarters) = 20000 claims

b. How many claims reps should LSI employ next year? Explain. What caseload
(average number of pending claims per claims rep) will the claims reps
experience?

10000 claims to close, each claim rep needs 4 hours to close the claim > 40000 hours
needed to close the 10000 claims.
1 quarter each claim rep needs 400 hours to close the claim > 40000/400 = 100 reps
needed.

There are 20000 expected pending claims for the year, with a total of 100 claim reps.
Each claim rep will experience 20000/100 = 200 caseloads.

5. A public transport bus company is investigating ways to improve its operation of

loop services from a particular bus interchange located next to an MRT station.
Loop services from this bus interchange typically go to a particular HDB town or
industrial area and return back to the interchange. Currently the company runs 4
loop services from this interchange. Average travel times required to complete
one loop (bus interchange-loop-bus interchange) for each of the loop services is
given in Table 1 below. The time taken for a loop depends on whether it is peak-
hours or not. During peak hours, the time required to complete a loop is higher,
due to the additional passengers in the bus as well the traffic on the road. The
amount of rest taken by the drivers (at the bus interchange) in between services
is 5 minutes during peak hours and 30 minutes during non-peak hours.

Time required for one Loop (interchange-loop-interchange),

Loop Service excluding rest time in minutes
Number During peak hours During non-peak hours
201 40 30
202 30 20
203 20 15
204 50 40
Table 1: Travel times for the loop services

The required frequency of service for each of the 4 loop services is 10 minutes
during peak hours (i.e. one bus every 10 minutes for each service) and 15
minutes (i.e. one bus every 15 minutes for each service) during non-peak hours.
a. If dedicated buses are used for each of the 4 services, what is the number of
buses required for each of the 4 services during peak hours? What is the
number of the buses required for each of the 4 services during non-peak
hours?
Service No. Buses required during peak Buses required during non-peak
201 I = R (6 buses/hour) x T (45mins I = R (4 buses/hour) x T (60mins =1
=0.75 hours spent on loop) hours spent on loop)
I = 4.5 ~ 5 buses I = 4 buses
202 I = R (6 buses/hour) x T (35minsI = R (4 buses/hour) x T (50mins
=0.583 hours spent on loop) =0.833 hours spent on loop)
I = 3.5 ~ 4 buses I = 3.3 ~ 4 buses
203 I = R (6 buses/hour) x T (25minsI = R (4 buses/hour) x T (45mins
=0.416 hours spent on loop) =0.75 hours spent on loop)
I = 2.5 ~ 3 buses I = 3 buses
204 I = R (6 buses/hour) x T (55mins I = R (4 buses/hour) x T (70mins =
=0.916 hours spent on loop) 1.166 hours spent on loop)
I = 5.5 ~ 6 buses I = 4.6 ~ 5 buses
Total buses 18 16
required

b. Instead of dedicated buses for each loop, the bus company is considering use
of a common fleet of buses for all the four services with the bus number
display in the front, back and side of the bus dynamically changed just at the
start of the particular service. By how much can the total fleet requirement
(number of buses) be reduced by adopting this strategy?

The flow unit here is one generic bus and its process boundary is loop 201,
then rest, followed by loop 202, then rest, and so on until the rest after loop
204. For peak period, the average flow time is 45 + 35 + 25 + 55 = 160 minutes
while the average flow rate is still 1 bus per 10 minutes. This gives a WIP of
160/10 = 16 buses. For non-peak period, the average flow time is 60 + 50 + 45
+ 70 = 225 minutes, while the average flow rate is still 1 bus per 15 minutes.
This gives a WIP of 225/15 = 15 buses. In the dedicated scenario, the fleet size
is 18 while here the fleet is 16, giving us a savings of 2 buses. This is one of the
benefits of using a “pooling strategy”.