Supplement 7 Learning Curves Saba Bahouth – UCO

Learning Learning is the permanent change in behavior due to repetition. Types of learning: Individual and Organizational. Learning Curve effect first observed in 1936 in airplane industry. 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. Saba Bahouth – UCO

Learning Curve Graph TN = (T1) (N ln .90 / ln 2) Hours per unit, TN Units, N

Learning Curve Coefficients Table Unit (N) 80% 85% Unit Time Total Time 1 … 1.000 2 0.800 1.800 0.850 1.850 3 0.702 2.502 0.773 2.623 4 0.640 3.142 0.723 3.345 :

Example 1 – Refurbishing Planes MaintAir has an order to refurbish the interior of 18 jet planes. Such work has a learning rate of 80%. The first plane took 300 hours to refurbish. What is the time needed to complete the fifth plane? What is the time needed to complete the first five planes? What is the time needed to complete planes 10 to 15? Saba Bahouth – UCO

Example 2 – Assembling Kitchens A building contractor asked our company to install the kitchens in his 20-apartments building. The first kitchen will take us 80 hours to complete. How long will it take to complete the 8th kitchen if the learning rate is 87% Saba Bahouth – UCO

Example 3 – Determining the Learning Rate Following is the data taken from a person assembling printers. What is the learning rate for printers assembly? Printer Minutes 1 46 2 39 3 35 4 33 5 32 6 30

Example 4 – Distributing Mail The mailman spent 5 hours distributing mail the last day of his first week on the job (day 6). How long will it take him to distribute the mail on Wednesday of the third week? Assume a learning rate of 90%. Saba Bahouth – UCO

Example 5 – Building Ships You’re 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.

Solution for Example 5 Arithmetic (Basic): Logarithmic: Table: Saba Bahouth – UCO

Learning Curve Applications Internal Determine labor standards Establish labor costs & budgets Scheduling External Purchasing Subcontracting Strategic Determine volume-cost changes Evaluation of company and industry performance Aircraft Assembly (1925-57): 80% Calculator (1975-78): 74% Heart Transplants (1985-88): 79% Saba Bahouth – UCO

Examples of Learning Curve Effects Improving Parameter Cumulative Parameter Learning Curve Slope (%) Time Frame 1. Model-T Ford production Price Units produced 86 1910-1926 2.Aircraft assembly Direct labor-hours per unit 80 1925-1957 3.Equipment maint. at GE Average time to replace a group of parts Number of replacements 76 Around 1957 4. Steel production Production worker labor-hours per unit produced 79 1920-1955 5.Integrated circuits Average price per unit 72 1964-1972 6.Hand-held calculator Average factory selling price 74 1975-1978 7.Disk memory drives Average price per bit Number of bits 8.Heart transplants 1-year death rates Transplants completed 1985-1988 Saba Bahouth – UCO

Criticisms of Learning Curves Lack strong theoretical justification Intermingle variables Learning effects Economies of scale Technological improvements Focus on cost not profit Saba Bahouth – UCO