Lecture Operations and supply chain management: The Core (3/e) – Chapter 4a: Learning curves

After reading the material in this chapter, you should be able to: Understand the concept of capacity and how important it is to manage capacity, explain the impact of economies of scale on the capacity of a firm, understand how to use decision trees to analyze alternatives when faced with the problem of adding capacity, describe the differences in planning capacity between manufacturing firms and service firms.

Learning Curves

Learning Curves

 A learning curve is a line that displays the

relationship between unit production and

cumulative number of units produced

 One way of learning is “learning by doing”

 As plants produce more, they gain experience in the best production methods, which reduces their costs in

a predictable manner

 This is observed as a decline in production costs (by a specific percentage) each time cumulative production doubles

 Learning rates are unique and depend upon the nature of

Learning Curves

Graphed on a logarithmic scale, the learning curve is a straight line

Learning Curve Assumptions

Learning Curves

 Learning curves can be developed from an

arithmetic tabulation, by logarithms, or some other curve-fitting technique

 The improved performance can be thought of

in two ways

 Time per unit – shows the decrease in time

required for each successive unit

 Output per time period – increase in number of

units produced over a fixed time period

Learning Curves

A 90% learning curve implies that each

time cumulative production doubles the cost per unit is reduced by 10%

Differences in learning curves can have

dramatic effects over time!

Learning Curves

 A logarithmic plot allows linear extrapolation

and more accurate interpretation

Excel: Learning Curve Calculations

Learning Curves – Logarithmic

Analysis

 The relationship between total number of units produced and learning can be expressed

mathematically

Learning Curves – Logarithmic

Analysis

 Example

 For an 80% learning curve, if the first unit

required 100,000 hours, how many hours will the eight unit require?

Learning Curve Tables

 When the learning percentage is known,

tables can be used to estimate labor hours for

a specific unit

 Multiply the initial unit labor hours by the

appropriate value from the table

Example: With an 80% learning rate, the eighth unit should

take 0.512 times the initial unit time If Y1 = 100,000, Y8 =

100,000(0.512) = 51,200

Learning Curve Example

From table 4A.5, with an 80%

improvement ratio unit 11 should take between 0.4765 and 0.4493 times the original time Interpolate to obtain a factor of 0.4629

Learning Curve Example

Excel: Learning Curve Calculations

Managerial Considerations

Managerial Considerations