Little’s Law for the U.S House Building Industry

Ehsan Gharaie1, Nick Blismas2 & Ron Wakefield3

1Lecturer, School of Property, Construction and Project Management, RMIT University, Phone +61 3 99251735, email: Ehsan.gharaie@rmit.edu.au
2Associate Professor, School of Property, Construction and Project Management, RMIT University, Phone +61 3 99255056, email: nick.blismas@rmit.edu.au
3Professor, Head of school, School of Property, Construction and Project Management, RMIT University, Phone +61 3 99253448, email: ron.wakefield@rmit.edu.au

Abstract

Although the housebuilding industry is a significant player in the housing supply pipeline, housing experts have paid little attention to this player and have focused more on the other players such as policy makers, financiers, and land developers. Research has tended to focus on house builders and individual housebuilding operations as the constructs of the whole house building industry. However, analysis of the dynamics of the whole industry as a single system has remained unexplored. This research investigates these dynamics in the US housebuilding industry and explores the applicability of Little’s law at the national level. The focus of the study is on single unit dwellings and the time span of the study is forty years between 1971 and 2010. Single unit dwellings made up seventy six percent of all dwellings completed in 2010. The analysis commences with the adaptation of the law for the house building industry. The industry’s parameters such as number of house starts, completion time, and number of houses under construction are used as the proxies for arrival rate, cycle time, and work in process. A time factor is added, and the average house completion time is predicted using the law. The predictions are compared with the actual data using error metrics and visual comparisons. The result shows that Little’s law can predict the dynamics of the industry with 5 percent error. Thus, it is applicable in the house building industry and can be used for the analysis of the industry’s dynamics. This research demonstrates that the US house building industry operates similar to a production line, and therefore offers industry practitioners and industry analysts powerful techniques for better understanding housing supply.

Keywords

Little’s law, work flow, work in process, production planning, US housebuilding industry

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Reference

Gharaie, E. , Blismas, N. & Wakefield, R. 2012, 'Little’s Law for the U.S House Building Industry' In:, Tommelein, I.D. & Pasquire, C.L., 20th Annual Conference of the International Group for Lean Construction. San Diego, USA, 18-20 Jul 2012.

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