Learning Curves

MODULE
PowerPoint presentation to accompany
Heizer, Render, Munson / Global Edition
Operations Management, Twelfth Edition
Principles of Operations Management, Tenth Edition

PowerPoint slides by Jeff Heyl

Copyright © 2017 Pearson Education Ltd ME - 1

 Outline
► What Is a Learning Curve?
► Learning Curves in Services and
Manufacturing
► Applying the Learning Curve
► Strategic Implications of Learning
Curves
► Limitations of Learning Curves

Copyright © 2017 Pearson Education Ltd ME - 2

 Learning Objectives
When you complete this chapter you
should be able to:
E.1 Define learning curve
E.2 Use the doubling concept to
estimate times
E.3 Compute learning-curve effects with
the formula and learning-curve table
approaches
E.4 Describe the strategic implications
of learning curves
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 What Is a Learning Curve
▶ Based on the premise that people and
organizations become better at their tasks as
the tasks are repeated
▶ Time to produce a unit decreases as more
units are produced
▶ Learning curves typically follow a negative
exponential distribution
▶ Time savings per unit decreases over time

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 Learning Curve Effect
Exponential graph of learning
Figure E.1(a)
Cost or time per repetition

100 –

50 –

| | | |
0 25 50 75 100
Cumulative repetitions (volume)
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 Learning Curve Effect
Log-log graph of learning
100 Figure E.1(b)
Cost or time per repetition

50
40

30

20

10 20 30 40 50 100
Cumulative repetitions (volume)
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 Learning Curves
T x Ln = Time required for the nth unit

T = unit cost or unit time of the first unit

L = learning curve rate
n = number of times T is doubled

First unit takes 10 labor-hours

70% learning curve is present
Fourth unit will require doubling twice — 1 to 2 to 4

Hours required for unit 4 = 10 x (.7)2 = 4.9 hours

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 Learning Curve Examples
TABLE E.1 Examples of Learning-Curve Effects
LEARNING-
IMPROVING CUMULATIVE CURVE
EXAMPLE PARAMETER PARAMETER SLOPE (%)
1. Model-T Ford Price Units produced 86
production
2. Aircraft Direct labor-hours per Units produced 80
assembly unit
3. Equipment Average time to replace Number of 76
maintenance a group of parts replacements
at GE

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 Learning Curve Examples
TABLE E.1 Examples of Learning-Curve Effects
LEARNING-
IMPROVING CUMULATIVE CURVE
EXAMPLE PARAMETER PARAMETER SLOPE (%)
4. Steel Production worker Units produced 79
production labor-hours per unit
produced
5. Integrated Average price per unit Units produced 72a
circuits
6. Handheld Average factory selling Units produced 74
calculator price

a
Constant dollars

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 Learning Curve Examples
TABLE E.1 Examples of Learning-Curve Effects
LEARNING-
IMPROVING CUMULATIVE CURVE
EXAMPLE PARAMETER PARAMETER SLOPE (%)
7. Disk memory Average price per bit Number of bits 76
drives
8. Heart 1-year death rates Transplants 79
transplants completed
9. Caesarean Average operation time Number of 93
section baby surgeries
deliveries

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 Learning Curves in Services
and Manufacturing
► Different organizations have different
learning curves
► Any change in process, product, or
personnel disrupts the learning curve

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 Learning Curves in Services
and Manufacturing
Internal: Labor forecasting,
scheduling, establishing
costs and budgets
External: Supply-chain negotiations
Strategic: Evaluation of company and
industry performance,
including costs and pricing

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 Applying the Learning Curve

▶ Doubling approach
▶ Simplest approach
▶ Labor cost declines at a constant rate, the
learning curve rate, as production doubles
▶ Does not work for other production
quantities

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 Applying the Learning Curve
▶ For an 80% learning rate

NTH UNIT PRODUCED HOURS FOR NTH UNIT

1
100.0

2 = (.8 x 100)
80.0

4 = (.8 x 80)
64.0

8 = (.8 x 64)
51.2

16 = (.8 x 51.2)
41.0
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 Formula Approach
Determine labor for any unit, TN , by

TN = T1(Nb)

where TN = time for the Nth unit

T1 = time to produce the
first unit
b = (log of the learning
rate)/(log 2)
= slope of the learning
curve
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 Formula Approach
TABLE E.2
Determine labor for any unit, TN , by
Learning-Curve Values of b

b LEARNING
TN = T1(N )RATE (%) b

70 – .515
where TN = time for
75 the Nth
unit
– .415
T1 = time to produce the
80 – .322
first unit
b = (log of85the learning
– .234
rate)/(log 2) 90 – .152
= slope of the learning
curve
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 Using Logs
Learning rate = 80%
First unit took 100 hours

TN = T1(Nb)
T3 = (100 hours)(3b)
= (100)(3log .8/log 2)
= (100)(3–.322)
= 70.2 labor hours

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 Learning Curve Table Approach

TN = T1C

where TN = number of labor-

hours required to produce the Nth
unit
T1 = number of labor-
hours required to produce the first
unit
C = learning-curve
coefficient found in Table E.3

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 Learning-Curve Coefficients
Learning-Curve Coefficients, Where Coefficient
TABLE E.3
C = N(LOG OF LEARNING RATE/LOG 2)
70% 85%
UNIT
UNIT TIME TOTAL TIME UNIT TIME TOTAL TIME
NUMBER COEFFICIENT COEFFICIENT COEFFICIENT COEFFICIENT
(N)

1.000 1.000 1.000 1.000

1
.700 1.700 .850 1.850
2
.568 2.268 .773 2.623
3
.490 2.758 .723 3.345
4
.437 3.195 .686 4.031
5
.306 4.932 .583 7.116
10
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 Coefficient Example
First boat required 125,000 hours
Labor cost = $40/hour
Learning factor = 85%

TN = T1C
T4 = (125,000 hours)(.723)
= 90,375 hours for the 4th boat
90,375 hours x $40/hour = $3,615,000

TN = T1C
T4 = (125,000 hours)(3.345)
= 418,125 hours for all four boats
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 Coefficient Example
Third boat required 100,000 hours
Learning factor = 85%

New estimate for the first boat

100,000
= 129,366 hours
.773

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 Strategic Implications
If a firm's strategy is to follow a steeper curve
than the rest of the industry, they can do this
by:
1. Following an aggressive pricing policy
2. Focusing on continuing cost reduction and
productivity improvement
3. Building on shared experience
4. Keeping capacity ahead of demand

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 Industry and Company
Learning Curves
Le
ar
Le nin
ar g cu
co nin rve
m gc
Price per unit (log scale)

pa for
ur ind
ny ve us
co fo try
st r pr
(c) ice
Loss Selling price
(b)
Gross profit (a)
margin

Figure E.2
Accumulated volume (log scale)
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 Limitations of Learning Curves
▶ Learning curves differ from company
to company as well as industry to
industry so estimates should be
developed for each organization
▶ Learning curves are often based on
time estimates which must be
accurate and should be reevaluated
when appropriate

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 Limitations of Learning Curves
▶ Any changes in personnel, design, or
procedure can be expected to alter the
learning curve
▶ Learning curves do not always apply to
indirect labor or material
▶ The culture of the workplace, resource
availability, and changes in the process
may alter the learning curve

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