In your textbook is an analysis of a process using Little's Law. This example calculates work-in-progress, total inventory, and flow time to determine the total cost of inventory in the system and the days of supply of inventory. The example found that the total worth of batteries in the system at any one time was $373,500 - and that is just the battery cost! Can you imagine how much inventory cost there is for the whole car?

After reading about the example in your textbook, you realize that your firm also has a high battery inventory that could be reduced. You go to your boss, wanting to show off what you have learned, and suggest analyzing the data for your company and determining what the cost and days of supply would be if the battery inventory could be reduced. Provided is the initial data set to analyze:

Data Set

Dataset for Module 7 Problem
Battery	$ 49.00	Cost
Current Inventory	7700	Units
If reduced to	6400	Units
If reduced to	3600	Units
If reduced to	1800	Units
If reduced to	600	Units

Throughput is the production rate of the plant: 200 cars per 8-hour shift, or 25 cars per hour. Since we use one battery per car, our throughput rate for the batteries is 25 per hour. Flow time is 12 hours, so the work-in-process is

We know from the problem that there are 8,000 batteries in raw material inventory, so the total number of batteries in the pipeline, on average, is

These batteries are worth 8,300 × $45 = $373,500.

The days of supply in raw material inventory is the “flow time” for a battery in raw material inventory (or the average amount of time a battery spends in raw material inventory). Here, we need to assume they are used in the same order they arrive. Rearranging our Little’s law formula:

So, flow time = 8,000 batteries/(200 batteries/day) = 40 days, which represents a 40-day supply of inventory.