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Operations Management Introduction To Learning Curves Module E. Learning. Learning: Relatively permanent change in behavior due to repetition & rewards 2 Types of learning Individual Organizational Results in ‘learning curve effect’ First observed in 1936 in airplane industry.

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operations management introduction to learning curves module e
Operations ManagementIntroduction To Learning CurvesModule E

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning
Learning
  • Learning: Relatively permanent change in behavior due to repetition & rewards
  • 2 Types of learning
    • Individual
    • Organizational
  • Results in ‘learning curve effect’
    • First observed in 1936 in airplane industry

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning curve effect
Learning Curve Effect
  • Time needed to produce a unit decreases with each additional unit
  • Time needed decreases at a decreasing rate as cumulative production increases
  • Decrease in time follows an exponential curve called learning or experience curve

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning curve graph

Hours per unit, TN

TN = (100)(N log.90/log2)

90% curve

80% curve

Cumulative units, N

Learning Curve Graph

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

factors affecting learning curves

Workers’ Skills

Material

Work Methods

Learning Curve

Product Design

Tools

Continuous Improvement Methods

Process Design

Factors Affecting Learning Curves

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning curves vary by product and industry

Aircraft Assembly (1925-57): 80%

Calculator (1975-78): 74%

© 1995 Corel Corp.

Heart Transplants (1985-88): 79%

© 1995 Corel Corp.

Learning Curves Vary by Product and Industry

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning curve applications
Learning Curve Applications
  • Internal
    • Determine labor standards
    • Establish labor costs & budgets
    • Scheduling
  • External
    • Purchasing
    • Subcontracting
  • Strategic
    • Determine volume-cost changes
    • Evaluation of company and industry performance

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

criticisms of learning curves
Criticisms of Learning Curves
  • Lack strong theoretical justification
  • Intermingle variables
    • Learning effects
    • Economies of scale
    • Technological improvements
  • Focus on cost not profit

© 1984-1994 T/Maker Co.

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

developing learning curves
Developing Learning Curves
  • Arithmetic approach
    • Uses relationship: T2N = L * TN
    • Useful only if values doubled
  • Logarithmic analysis
    • Uses relationship: TN = T1N log L / log 2
      • N = Unit of interest; T1= Time for unit 1
    • Can find time for any value ofN
  • Learning curve coefficients approach
    • Uses relationship: TN = T1C(from Table)

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning curve coefficients table

Unit

80%

85%

(N)

Unit

Total

Unit

Total

Time

Time

Time

Time

1

1.000

1.000

1.000

1.000

2

.800

1.800

.850

1.850

3

.702

2.502

.773

2.623

4

.640

3.142

.723

3.345

:

:

:

:

:

:

Learning Curve Coefficients Table

Table E.3

P. 838

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

excel om arithmetic sample
Excel OM – Arithmetic Sample

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning curves determining time example
Learning CurvesDetermining Time Example

You’re a planner for Viking Ships. The first boat took 125,000 labor-hours to make. Boats 2 & 3 were produced with a learning factor of 85%. How long will the 4th boat take so that raiding can begin?

© 1995 Corel Corp.

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

arithmetic approach
Arithmetic Approach
  • Formula: T2N = L * TN
  • 1st unit: T1 = 125,000 hr.
  • 2nd unit: T2 = L * T1 = .85 * 125,000 = 106,250 hr.
  • 4th unit: T4 = L * T2 = .85 * 106,250 = 90,312 hr.

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

logarithmic approach
Logarithmic Approach
  • Formula: TN = T1 (N log L / log 2)
    • N = Unit of interest
    • T1 = Time for unit 1
    • L = Learning rate
  • T1 = 125,000 hr.
  • 4th unit: T4 = T1 (Nlog L / log 2) = 125,000 • (4 log .85 / log 2) = 90,312 hr.

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

coefficient approach
Coefficient Approach
  • Formula: TN = T1 C
    • N = Unit of interest
    • T1 = Time for unit 1
    • C = Learning curve coefficient from table
  • T1 = 125,000 hr.; C = .723 from Table E3
  • 4th unit: T4 = T1 C = 125,000 * (.723) = 90,375 hr. (rounding C)

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning curves determining rate example
Learning CurvesDetermining Rate Example
  • If you Know the First Ship took 125,000 hours to construct,
  • And the 4th ship took 100,000 hours to construct…
  • What will your Learning Curve Be?
  • Excel OM >> Learning Curves >> Determining The Rate

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning curves and strategy

Hours per unit

For a low price, high volume strategy, a firm must lower unit hours & costs to maintain profit margins (i.e., steeper curve).

120

100

80

60

Industry average

40

Steeper curve

20

0

0

100

200

300

400

Cumulative units

Learning Curves and Strategy

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458

learning curves and strategy18
Learning Curves and Strategy

To pursue a learning curve steeper than that of the industry, a firm must:

  • follow an aggressive pricing policy
  • focus on continuing cost reduction and productivity improvement
  • build on shared experience
  • keep capacity growing ahead of demand

© 2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458