Module 5 Learning Curve
Table of contents
1. Objectives
2. Lesson Proper
3. Learning Curve Definition
4. Computation of Learning Curve Ratio
5. Learning Curve Equation
6. Main Uses of Learning curves
7. Cumulative Average Time Learning Model
8. Limitations of Learning Curve
9. References
1. Objectives
The Learners are expected to:
1. Understand what is Learning curve
2. To understand the use the learning curve to conduct production planning, cost
forecasting, and logistics schedules
3. Describe the strategic implications of learning curves
4. To understand how to compute learning curve effects
5. Explain why the learning curve is important
2. Lesson Proper
Learning Curve
3. Learning Curve Definition
● Most organizations learn and improve over time. As firms and employees perform a task
over and over, they learn how to perform more efficiently.
● This means that task times and costs decrease. Learning curves are based on the
premise that people and organizations become better at their tasks as the tasks are
repeated.
● A learning curve graph displays labor hours per unit versus the number of units
produced. From it we see that the time needed to produce a unit decreases, usually
following a negative exponential curve, as the person or company produces more units.
● In other words, it takes less time to complete each additional unit a firm produces.
4. Computation of Learning Curve Ratio
5. Learning Curve Equation
For Example:
6. Main Uses of Learning curves
Helps to analyze CVP Relationship during familiarization phase
● Learning curve helps to analyze cost-volume-profit relationship during familiarization
phase of product or process and thus it is very useful for cost estimates.
● Learning curve is of immense value as a tool for forecasting
Helps in budgeting and profit planning
● Incorporation of the learning curve introduces new complexity and sophistication in the
process of budgeting and profit planning.
● Budget executive should select those costs which reflect learning effect and then he
should be able to incorporate this effect in process of developing budgets or in the
exercises relating to project planning.
●
Design makers
● It helps design engineers in making decisions based upon expected (predictable from
past experience) rates of improvement.
Helps in negotiations
● It is very helpful to Government in negotiations about the contracts.
● Government receives full advantage of the decreasing unit cost in establishing the
contract price.
Helps in setting standards
The learning curve is extremely useful in setting standards in learning phase.
7. Cumulative Average Time Learning Model
Learning increase with a fixed percentage every time when production becomes double.
8. Limitations of Learning Curve
For Example:
9. References
1. Powell,S., & Baker,K. (2013). Management Science: The Art of Modeling with
Spreadsheets. [Link] .ISBN: 9781118786840
2. William, T.(2008). Management Science in Practice. [Link]:
978EUDTE00317
3. Puschmann, T., & Alt, R. (2005). Supply Chain Management: An International Journal.
Successful use of e-procurement in supply chains, 10 (2), 122 -[Link], S., Müll
4. Chen, F., Drezner, Z., Ryan, J. K., & Simchi-Levi, D. (2000). Quantifying the Bullwhip Effect
in a Simple Supply Chain: The Impact of Forecasting, Lead Times, and Information.
Management Science , 436- 443.
5. [Link]