Learning Curve

Submitted by: Group 2; Section B Asim Kumar Verma Gautam Bansal Hitesh Babbar Jhanavi Thakkar Karishma Dattani 2010056 2010075 2010079 2010086 2010092

Contents
Introduction Learning Curve Effects Factors affecting LC Applications Developing of learning curves Learning curve strategy Limitations of LC

Introduction
Learning : Relatively permanent change in
behavior due to repetition & rewards

Two Types of learning

Individual Organizational

Types of learning
Individual Learning Improvement when individuals gain a skill or efficiency by repetition of a job Organizational Learning Improvement from the groups of individuals from repetition and changes in administration, equipment, and product design

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 Results in learning curve effect
First observed in 1936 in airplane industry by T P Wright

Learning Curves Vary by Product and Industry

Aircraft Assembly 80% Calculator 74%

Heart Transplants 79%

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

Factors Affecting Learning Curves

Workers Skills Material Work Methods

Product Design

Learning Curve

Tools

Continuous Improvement Methods

Process Design

Applications of Learning Curves

Internal: labor forecasting, scheduling, establishing costs and budgets supply chain negotiations evaluation of company and industry performance, including costs and pricing

External: Strategic:

Developing Learning Curves

Arithmetic approach
Uses relationship: T2N = L * TN Useful only if values doubled

Logarithmic analysis
Uses relationship: TN = T1 N log L / log 2 N = Unit of interest; T1 = Time for unit 1 Can find time for any value of N

Learning curve coefficients approach

Uses relationship: TN = T1C (from Table)

Learning Curve Coefficients Table

Unit (N) 1 2 3 4 : : 80% Unit Total Time Time 1.000 .800 .702 .640 : 1.000 1.800 2.502 3.142 : 85% Unit Total Time Time 1.000 .850 .773 .723 : 1.000 1.850 2.623 3.345 :

Determining Time Example

Youre 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.

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

4th unit:

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 (N log L / log 2) = 125,000 (4 log .85 / log 2) = 90,312 hr.

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 4th unit: T4 = T1 C = 125,000 * (.723) = 90,375 hr. (rounding C)

Learning Curves Determining 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?

PowerPoint presentation to accompany

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

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140000 120000 100000 80000 60000 40000 20000 0 Time in Hours to Construct Ship No

Learning Curve Rate 89%

Exhibit : Units and Labour hour required

Units 1 2 4 8 16 32 64 128 256 80% LC 100000 80000 64000 51200 40960 32768 26214 20972 16777 90% 100000 90000 81000 72900 65610 59049 53144 47830 43047 70% 100000 70000 49000 34300 24010 16807 11764.9 8235.43 5764.801

A r i t h me t i c P l o t o f L e a r n i n g C u r v e s

120000 100000 80000

60000 40000 20000 0

U ni t s 90%

80% LC 70%

Learning Curves and Strategy

Hours per unit For a low price, high volume 120 strategy, a firm must lower unit hours & costs to maintain profit 100 margins (i.e., steeper curve). 80 60 40 20 0 0 100 200 300 400 Cumulative units

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

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Limitations of Learning Curve

Estimates should be developed for each organization. Learning curves are based on time estimates which must be accurate and should be reevaluated when appropriate. Any changes in personnel, design or procedure can be expected to alter the LC. The culture of the workplace, resource availability and changes in the process may alter the LC.

Bibliography
www.wikipedia.com www.hrdgateway.org Operations and Supply Management By Chase, Shankar, Jacobs and Aquilano Under the Guidance of :Mr. J Sharma

Thank you