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- 1. E - 1© 2011 Pearson Education, Inc. publishing as Prentice HallE Learning CurvesPowerPoint presentation to accompanyHeizer and RenderOperations Management, 10ePrinciples of Operations Management, 8ePowerPoint slides by Jeff Heyl
- 2. E - 2© 2011 Pearson Education, Inc. publishing as Prentice HallOutline Learning Curves in Services andManufacturing Applying the Learning Curve Arithmetic Approach Logarithmic Approach Learning-Curve Coefficient Approach Strategic Implications of LearningCurves Limitations of Learning Curves
- 3. E - 3© 2011 Pearson Education, Inc. publishing as Prentice HallLearning ObjectivesWhen you complete this module youshould be able to:1. Define a learning curve2. Use the arithmetic concept toestimate times3. Compute learning curve effects withthe logarithmic and learning-curvecoefficient approaches4. Describe the strategic implications oflearning curves
- 4. E - 4© 2011 Pearson Education, Inc. publishing as Prentice HallLearning Curves Based on the premise that people andorganizations become better at theirtasks as the tasks are repeated Time to produce a unit decreases asmore units are produced Learning curves typically follow anegative exponential distribution The rate of improvement decreasesover time
- 5. E - 5© 2011 Pearson Education, Inc. publishing as Prentice HallLearning Curve EffectFigure E.1Cost/timeperrepetitionNumber of repetitions (volume)0
- 6. E - 6© 2011 Pearson Education, Inc. publishing as Prentice HallLearning CurvesT x Ln = Time required for the nth unitwhere T = unit cost or unit time of the first unitL = learning curve raten = number of times T is doubledFirst unit takes 10 labor-hours70% learning curve is presentFourth unit will require doubling twice — 1 to 2 to 4Hours required for unit 4 = 10 x (.7)2 = 4.9 hours
- 7. E - 7© 2011 Pearson Education, Inc. publishing as Prentice HallLearning Curve ExamplesTable E.1ExampleImprovingParametersCumulativeParameterLearning-CurveSlope(%)Model -T FordproductionPrice Units produced 86AircraftassemblyDirect labor-hoursper unitUnits produced 80Equipmentmaintenanceat GEAverage time toreplace a group ofpartsNumber ofreplacements76
- 8. E - 8© 2011 Pearson Education, Inc. publishing as Prentice HallLearning Curve ExamplesTable E.1ExampleImprovingParametersCumulativeParameterLearning-CurveSlope(%)SteelproductionProduction workerlabor-hours per unitproducedUnits produced 79IntegratedcircuitsAverage price perunitUnits produced 72HandheldcalculatorAverage factoryselling priceUnits produced 74
- 9. E - 9© 2011 Pearson Education, Inc. publishing as Prentice HallLearning Curve ExamplesTable E.1ExampleImprovingParametersCumulativeParameterLearning-CurveSlope(%)Disk memorydrivesAverage price perbitNumber of bits 76Hearttransplants1-year death rates Transplantscompleted79Cesareansection babydeliveriesAverage operationtimeNumber ofsurgeries93
- 10. E - 10© 2011 Pearson Education, Inc. publishing as Prentice HallUses of Learning CurvesInternal: labor forecasting,scheduling, establishingcosts and budgetsExternal: supply chain negotiationsStrategic: evaluation of company andindustry performance,including costs and pricing
- 11. E - 11© 2011 Pearson Education, Inc. publishing as Prentice HallArithmetic Approach Simplest approach Labor cost declines at a constant rate,the learning rate, as production doubles An example using an 80% learning curveNth Unit Produced Hours for Nth Unit1 100.02 80.0 = (.8 x 100)4 64.0 = (.8 x 80)8 51.2 = (.8 x 64)16 41.0 = (.8 x 51.2)
- 12. E - 12© 2011 Pearson Education, Inc. publishing as Prentice HallLogarithmic ApproachDetermine labor for any unit, TN , byTN = T1(Nb)where TN = time for the Nth unitT1 = hours to produce the first unitb = (log of the learning rate)/(log 2)= slope of the learning curve
- 13. E - 13© 2011 Pearson Education, Inc. publishing as Prentice HallLogarithmic ApproachDetermine labor for any unit, TN , byTN = T1(Nb)where TN = time for the Nth unitT1 = hours to produce the first unitb = (log of the learning rate)/(log 2)= slope of the learning curveLearningRate (%)b70 – .51575 – .41580 – .32285 – .23490 – .152Table E.2
- 14. E - 14© 2011 Pearson Education, Inc. publishing as Prentice HallLogarithmic ExampleLearning rate = 80%First unit took 100 hoursTN = T1(Nb)T3 = (100 hours)(3b)= (100)(3log .8/log 2)= (100)(3–.322)= 70.2 labor hours
- 15. E - 15© 2011 Pearson Education, Inc. publishing as Prentice HallCoefficient ApproachTN = T1Cwhere TN = number of labor-hours requiredto produce the Nth unitT1 = number of labor-hours requiredto produce the first unitC = learning-curve coefficient foundin Table E.3
- 16. E - 16© 2011 Pearson Education, Inc. publishing as Prentice HallLearning-Curve CoefficientsTable E.370% 85%Unit Number(N)UnitTimeTotalTimeUnitTimeTotalTime1 1.000 1.000 1.000 1.0002 .700 1.700 .850 1.8503 .568 2.268 .773 2.6234 .490 2.758 .723 3.3455 .437 3.195 .686 4.03110 .306 4.932 .583 7.11615 .248 6.274 .530 9.86120 .214 7.407 .495 12.402
- 17. E - 17© 2011 Pearson Education, Inc. publishing as Prentice HallCoefficient ExampleFirst boat required 125,000 hoursLabor cost = $40/hourLearning factor = 85%TN = T1CT4 = (125,000 hours)(.723)= 90,375 hours for the 4th boat90,375 hours x $40/hour = $3,615,000TN = T1CT4 = (125,000 hours)(3.345)= 418,125 hours for all four boats
- 18. E - 18© 2011 Pearson Education, Inc. publishing as Prentice HallCoefficient ExampleThird boat required 100,000 hoursLearning factor = 85%100,000.773= 129,366 hoursNew estimate for the first boat
- 19. E - 19© 2011 Pearson Education, Inc. publishing as Prentice HallStrategic ImplicationsTo pursue a strategy of a steeper curvethan the rest of the industry, a firm can:1. Follow an aggressive pricing policy2. Focus on continuing cost reductionand productivity improvement3. Build on shared experience4. Keep capacity ahead of demand
- 20. E - 20© 2011 Pearson Education, Inc. publishing as Prentice HallIndustry and CompanyLearning CurvesFigure E.2Priceperunit(logscale)Accumulated volume (log scale)Gross profitmarginLoss(a)(c)(b)
- 21. E - 21© 2011 Pearson Education, Inc. publishing as Prentice HallLimitations of LearningCurves Learning curves differ from companyto company as well as industry toindustry so estimates should bedeveloped for each organization Learning curves are often based ontime estimates which must be accurateand should be reevaluated whenappropriate
- 22. E - 22© 2011 Pearson Education, Inc. publishing as Prentice HallLimitations of LearningCurves Any changes in personnel, design, orprocedure can be expected to alter thelearning curve Learning curves do not always apply toindirect labor or material The culture of the workplace, resourceavailability, and changes in the processmay alter the learning curve
- 23. E - 23© 2011 Pearson Education, Inc. publishing as Prentice HallAll rights reserved. No part of this publication may be reproduced, stored in a retrievalsystem, or transmitted, in any form or by any means, electronic, mechanical, photocopying,recording, or otherwise, without the prior written permission of the publisher.Printed in the United States of America.

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