Operations

Management
Module E
Learning Curves
PowerPoint presentation to accompany
Heizer/Render
Principles of Operations Management, 7e
Operations Management, 9e
2008 Prentice Hall, Inc.

E1

Outline
Learning Curves in Services and
Manufacturing
Applying the Learning Curve
Arithmetic Approach
Logarithmic Approach
Learning-Curve Coefficient Approach

Strategic Implications of Learning

Curves
Limitations of Learning Curves
2008 Prentice Hall, Inc.

E2

Learning Objectives
When you complete this module you
should be able to:
1. Define a learning curve
2. Use the arithmetic concept to
estimate times
3. Compute learning curve effects with
the logarithmic and learning-curve
coefficient approaches
4. Describe the strategic implications of
learning curves
2008 Prentice Hall, Inc.

E3

Learning Curves
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
The rate of improvement decreases
over time
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Cost/time per repetition

Learning Curve Effect

Number of repetitions (volume)

Figure E.1

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E5

Learning Curves
T x Ln = Time required for the nth unit
where

T
L
n

=
=
=

unit cost or unit time of the first

learning curve rate
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
2008 Prentice Hall, Inc.

E6

Learning Curve Examples

Example
Model -T Ford
production

Improving
Parameters
Price

LearningCurve
Cumulative
Slope
Parameter
(%)
Units produced
86

Aircraft
assembly

Direct labor-hours
per unit

Units produced

80

Equipment
maintenance
at GE

Average time to
Number of
replace a group of
replacements
parts

76

Steel
production

Production worker
labor-hours per
unit produced

79

Units produced

Table E.1
2008 Prentice Hall, Inc.

E7

Learning Curve Examples

LearningCurve
Slope
(%)
72

Example
Integrated
circuits

Improving
Parameters
Average price per
unit

Cumulative
Parameter
Units
produced

Handheld
calculator

Average factory
selling price

Units
produced

74

Disk memory
drives

Average price per

bit

Number of bits

76

Heart
transplants

1-year death rates

Transplants
completed

79

Table E.1
2008 Prentice Hall, Inc.

E8

Uses of Learning Curves

Internal:

labor forecasting,
scheduling, establishing
costs and budgets

External: supply chain negotiations

Strategic: evaluation of company and
industry performance,
including costs and pricing

2008 Prentice Hall, Inc.

E9

Arithmetic Approach
Simplest approach
Labor cost declines at a constant rate,
the learning rate, as production doubles
Nth Unit Produced

Hours for Nth Unit

1
2

100.0
80.0 = (.8 x 100)

4
8

64.0 = (.8 x 80)

51.2 = (.8 x 64)

16
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41.0 = (.8 x 51.2)

E 10

Logarithmic Approach
Determine labor for any unit, TN , by
TN = T1(Nb)
where

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TN =
time for the Nth unit
T1 =
hours to produce the
first unit
b =
(log of the learning rate)/
(log 2)
=
slope of the learning
curve
E 11

Logarithmic Approach
Determine labor for any unit, TN , by
TN = T1(Nb)
where

Learning
Rate
(%)
time for
the
Nth

TN =
unit b
T1 =
hours to70
produce the
.515
first unit
75
.415
b =
(log of the learning
80
.322
rate)/(log 2)
=
slope of 85
the learning
.234
curve
90
.152
Table E.2

2008 Prentice Hall, Inc.

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Logarithmic Example
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

2008 Prentice Hall, Inc.

E 13

Coefficient Approach
TN = T1C
where

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TN =
number of laborhours required to produce the
Nth unit
T1 =
number of laborhours required to produce the
first unit
C =
learning-curve
coefficient found in Table E.3
E 14

Learning-Curve Coefficients
Table E.3

70%

85%

Unit
Number
(N)

Unit Time

Total Time

Unit Time

Total Time

1.000

1.000

1.000

1.000

.700

1.700

.850

1.850

.568

2.268

.773

2.623

.490

2.758

.723

3.345

.437

3.195

.686

4.031

10

.306

4.932

.583

7.116

15

.248

6.274

.530

9.861

20

.214

7.407

.495

12.402

2008 Prentice Hall, Inc.

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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
T4

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=
=
=

T1C
(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

2008 Prentice Hall, Inc.

E 17

Strategic Implications
To pursue a strategy of a steeper curve
than the rest of the industry, a firm can:
1. Follow an aggressive pricing policy
2. Focus on continuing cost reduction
and productivity improvement
3. Build on shared experience
4. Keep capacity ahead of demand

2008 Prentice Hall, Inc.

E 18

Price per unit (log scale)

Industry and Company

Learning Curves

Figure E.2
2008 Prentice Hall, Inc.

In
du
C
st
om
ry
pa
pr
ice
ny
co
st
(c)
Loss
(b )

Gross profit
margin

(a)

Accumulated volume (log scale)

E 19

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

2008 Prentice Hall, Inc.

E 20

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
2008 Prentice Hall, Inc.

E 21