Work in Progress / Backlog
WIPThe number of units currently being processed or waiting in a queue at any point in time.
Also known as: Inventory (operations management), Queue, Buffer, Open Items
WIP is unavoidable, if a process is doing anything, there’s at least some work in progress. Zero WIP means zero throughput means zero output.
WIP is driven by capacity utilization. At 50% utilization, a work centre has work half the time (WIP = 0.5). At 100% utilization (the bottleneck), WIP = 1.0, there’s always a unit being processed.
Backlog develops when demand exceeds capacity. The excess units queue up, and the queue grows over time at the rate of demand − capacity per time period. This queued inventory adds to WIP and increases flow time for every subsequent unit.
Formula
WIP at a step = Capacity Utilization (as a decimal)
Backlog growth rate: demand − capacity per time period (when demand > capacity)
Example
A step with 80% utilization has an average WIP of 0.8. A bottleneck at 100% has WIP of 1.0.
If demand is 12/hour and capacity is 10/hour, 2 units per hour go into the queue. After 5 hours, the backlog is 10 units. Each new unit entering the queue waits longer than the one before it.
Why It Matters
Inventory, whether physical goods or digital work items, is an indicator of process health. Excessive WIP or growing backlogs signal a capacity problem, a delay, or a quality issue somewhere upstream. Identifying where inventory builds up identifies the area for improvement.