1. Learning Curves
Guanyi Lu
November 27, 2018

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Learning Objectives
Understand what learning curves are and how they can be estimated
Apply learning curves to estimate the cost to produce products in the future
Describe how companies improve based on individual and organization learning
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3. Learning Curve Theory “As the quantity of units manufactured
doubles, the number of direct labor hours it takes to produce an individual unit decreases at a uniform rate.”
-- Wright T.P., “Factors Affecting the Cost of Airplanes”,
Journal of Aeronautical Sciences, 1936
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Learning Curve Theory
Learning curve: A line displaying the relationship between unit production time and the cumulative number of units produced
The basis of the learning curve theory
The amount of time required to complete a given task or unit of a product will be less each time the task is undertaken
The unit time will decrease at a decreasing rate
The reduction in time will follow a predictable pattern
Types of learning
Individual learning (practice makes perfect)
Organizational learning
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Learning Curve Theory
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Logarithmic Analysis
Yx = Kxn Yx = time for xth unit x = unit number K = time for the first unit n = log b / log 2 b = learning rate (learning percentage), Which is the time to produce the (2x)th unit divided by the time to produce the xth unit
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Logarithmic Analysis
Yx = Kxn Yx = time for xth unit x = unit number K = time for the first unit n = log b / log 2 b = learning rate (learning percentage), Which is the time to produce the (2x)th unit divided by the time to produce the xth unit
Summarized tables
(provide you xn)
Y8 = ?
Given x=8, K=100,000, b=.8
Step1 n= log(.8)/log2 = -.322
Step2 Y8= 100,000*(8)-.322 = 51,192
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Learning Curves
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Learning Curves
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10. Learning Curves—Practice1
Assume a crew just installed and calibrated the first of four new pieces of support equipment. It took 100 labor hours and the learning rate is 90%.
(1) How long should the 3rd unit take?
(2) How long should the first 3 units take?
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11. Learning Curves—Practice2
Captain Nemo, owner of the Suboptimum Underwater Boat Company (SUB), is puzzled. He has a contract for 10 boats and has completed 4 of them. He has observed that his production manager, young Mr. Overick, has been assigning more and more people to torpedo assembly after the construction of the first four boats. The first boat, for example, required 225 workers, each working a 40-hour week, while 45 fewer workers were required for the second boat. Overick has told them that “this is just the beginning” and that he will complete the last boat in the current contract with only 100 workers! Overick is banking on the learning curve, but has he gone overboard?
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12. Learning Curves—Practice3
SUB has produced the first unit of a new line of mini-subs at a cost of $500,000 ($200,000 for materials and $300,000 for labor). It has agreed to accept a 10 percent profit and it is willing to contract on the basis of a 70 percent learning curve
What will be the contract price for the first three mini-subs?
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Learning Curves
How to Improve Individual Learning
Proper selection of workers
Proper training
Motivation
Work specialization
Do one or very few jobs at a time
Use tools that support performance
Provide quick and easy access for help
Allow workers to help redesign tasks
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Learning Curves
Organizational Learning
Organizations learn as well
A main source is individual learning
An organization also acquires knowledge in its technology, its structure, documents it retains, and standard operating procedures
Knowledge can also be embedded in the organizational structure
Knowledge can depreciate if individuals leave the organization
Knowledge can depreciate if technologies become inaccessible or difficult to use
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Learning Curves
Estimating the Learning Percentage Before Production
Assume that the learning percentage will be the same as it has been for previous applications within the same industry
Assume that it will be the same as it has been for the same or similar products
Analyze the similarities and differences between the proposed start-up and previous start-ups and develop a revised learning percentage that appears to best fit the situation
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Learning Curves
Learning Curve Applications
Cost estimation
Production scheduling
Setting sales price
Work force planning
Formulating business strategy
Estimating defects
Product design
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Learning Curves
Q & A
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