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Learning from Productivity Learning Curves

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Learning Curves in Manufacturing
 Learning from Productivity Learning Curves

Introduction
The learning rates associated with new platform technologies are often underestimated during the
early phases of commercialization while forecasting process productivity performance. Productivity is
correlated to cumulative or experience according to the log-linear model developed in 1936. USG
corporation used the model to analyze product performance, and they identified three distinct
productivity periods consisting of a stagnant period, a period dominated by rapid gains in conversion
efficiencies and process reliability, and a final period associated with capacity gains through process
speed-ups. The log-linear model was determined to have helped in predicting new process operating
performance, forecasting future performance, and identifying processes that are under-performing.

Methodology
Productivity is measured as labor hours per unit output and defined as the net unit output per gross
scheduled hour of operation.
Production rates, process efficiency, and process reliability are accounted for by this metric.
P=60 x Prate x [Peff x Prel], where
P = Productivity, ft2/gross hour;
Prate= Production rate, ft2/min; Peff= process efficiency rate,
percent; Prel= Process reliability, percent.
Process efficiency is the ratio of net production to gross production. Process reliability is the ratio of
actual production hours to scheduled production hours.
Overall, P, Peff, and Prel factors were analyzed against cumulative net hours per operation.
Finally, a process performance ratio was defined as the product of Peff & Prel, normalized to
performance at 1000 cumulative net hours of operation.

Results & Discussion

After analyzing, we found three distinct periods of productivity for performance analysis of
employees at USG Corporations.
1. Stagnant Period: This period occurs in the initial 1,000 networking hours and lasts for over
six months with a flat productivity curve. It is characterized by low process efficiency and
reliability. It witnesses a huge number of quality issues and equipment failure. Majority of the
workers show lesser knowledge of the work processes in this period.
The aim of this period is to keep the process flowing, and this period has a greater impact on
R&D processes.
2. Process Hardening Period: This occurs between 1,000 to 10,000 networking hours and lasts
for about 1-3 years, and process efficiency and reliability is improved. The process
knowledge in this period within the manufacturing staff reaches or surpasses that required in
R&D processes; hence this productivity period has a greater impact on manufacturing
processes.
3. Mature Period: This period occurs beyond 10,000 networking hours and is characterized
greatly by speeding-up processes. During this period, the productivity gains are majorly or
solely attributed to process speed-ups. Also, the efficiency and reliability of the process in this
period are at their peak.
This period defines a strong partnership between R&D and manufacturing processes. Some
major activities into action in this period are product proliferation, cost-optimization, and in-
place capacity expansion.

Criticism :
But, this model for analysis is not suited for capital-intensive manufacturing processes
due to diminishing productivity gains, organizational forgetting, which led to a high
employee turnout ratio.

Implications for R&D Organizations

Business stalwarts, researchers, and manufacturing personnel view their newly achieved technological
advancement in high esteem. However, the deployment is not as easy as it seems. In most cases, the
expected and the initial financial returns hardly match. The problems arising from low operating
experience and the new technology often send the initial excitement to the backseat.
The log-linear model can be used by researchers to compare and trace productivity progress ratios of
the first generation to that of the later generations.
The people involved in the engineering and R&D of process design and development must include
reliability analysis in the initial stages. The ability to work within the existing product development
cycle depends heavily on the reliability of the process adopted.
The simplicity shouldn't be compromised, especially in the second phase, where there is a steep rise in
learning. Product line proliferation must be paid attention to in the third phase, where changes are
expected. The product line breadth needs to accommodate the production hours required to push
through the initial learning period. The manufacturing unit must be fully organized and functional
until the maximum utility is reached.
The general belief is that the learning rates vary across industries and organizations. The log-linear
model could be utilized to set the standards based on past performances and set the best learning
practices to be applied to future projects.

Conclusion
The processes help in facilitating a way to:
 Estimate performance before the process
 Forecast future performance of current production lines
 Identify underperforming processes

Reference/Bibliography

Wright, T.P. "Factors Affecting the Cost of Airplanes","Journal of Aeronautical

Sciences",1936)
Argote, L. and Epple, D. "Learning Curves in Mnufacturing", Science Vol. 247 (1990)
 Learning Curves in Manufacturing

Introduction:

When an organization produces more of any product, the unit cost of production decreases
too at a decreasing rate. Thus, this phenomenon is known as learning curve, progress curve,
and experience curve, and so on.
When we observed the learning curve for the production of an advanced military jet in
1970s and 1980s it showed us two properties of learning:
 The direct labor hours of an aircraft decreased significantly during assembling them
as they gained experience during the production.
 We also observed that when cumulative output increases, the rate of reduction of
assembly hours decreases.

We have to identify the factors affecting organizational learning curves and use this
knowledge to improve manufacturing performance. This can help managers improve the
performance of a firm.

Methodology

The learning curve is a power function that is defined conventionally as y = ax^-b

where 'y' denotes the number of direct labor hours, we would require while producing the
xth unit
'a' denotes the number of direct labor we would require while producing the first unit
'x' denotes the cumulative number of units produced
'b' denotes the parameter that measures the rate of labor hours that gets reduced as our
cumulative output increases.
As we can figure out from the equation, the standard measure is the cumulative number of
units produced.
Several new trends in research on organizational learning curves are apparent.
- To include all the industrial accidents, defects, or complaints, the set of outcome measures
had to be broadened.
-The effect that transfer of productivity gains acquired through learning in an organization is
also kept under observation.
-Utmost attention is being given to the various factors that contribute to organizational
learning.
Results & Discussion

Variation in Organizational Learning rates:

The frequency distribution of the progress ratio reflected that variation in rate productivity increases
with the increase in the cumulative output.
Different rates of learning are the function of different products, variation across the organizations and
organizational units producing different products.

These variations are due to-

a. Organizational forgetting:
i. when the production in an organization is resumed after an interruption there, the unit
cost is often higher than the unit cost level achieved before the interruption.
ii. Also, knowledge acquired through learning by doing tends to depreciate because
individual employees forget how to perform tasks, or it is seen that individuals leave
the organizations and are replaced by the one with no or less experience.
b. Turnover:
i. Employee turnover is expected to have an impact on the learning and forgetting in an
organization when the organizational knowledge is possessed by individual
employees, so different turnover may lead to different organizational learning curves.
ii. Turnover matters more in the organization with no standardized jobs and procedures
for transmitting knowledge to new members. So, the turnover of managers and
technical staff matters more than the turnover of the direct production workers.
c. Transfer of Productivity Gains:
i. Any two organizations with production experience for a related product may have a
faster learning rate than the organization without prior experience.
ii. Transfer of knowledge across the organization is also observed, which occurs through
personnel movement, communication, participation in meetings and conferences,
training, improved supplies, reverse engineering, etc.
iii. Difference in the rate of learning is also observed across plants due to incomplete
transfer across shifts within plants

d. Other factors:
i. other factors that lead to variation in learning curves include the economies of scale;
when there is an increase in scale of operation, productivity will increase because of
the increasing exploitation of economies of scale.
It is necessary to control factors like labor turnover, product mix, cost of inputs, etc. to reduce
variation in organizational learning rates

Conclusion
While in many organizations, learning curves have been identified, there is substantial
variance in the pace at which businesses learn, Ranging from manufacturing programs with
little to no learning to the ones with remarkable growth in productivity.
The explanations include organizational forgetting, employee turnover, transfer of knowledge
across products.

Reference/Bibliography
 L. Greenberg, Min. Eng. 23, 51 (1971).
 L. Argote, in preparation GSIA Working Paper,.
 Argote, S. L. Beck D. Epple, Manage. Sci.
 M. B. Lieberman, Rand J. Econ. 15, 213 (1984).