CHAPTER 3 SUPPLEMENT

Learning Curves

LEARNING OBJECTIVES
After completing this supplement, you should be able to:
1. Use the learning-curve formula or learning curve chart to estimate the
time required to produce a given unit.
2. Use historical data to estimate the learning factor

INTRODUCTION TO LEARNING CURVES

As we have discussed, time standards can be an extremely useful management tool.
However, there are situations in which time standards have little meaning because task
times are changing. This occurs most often when a new product or new technology is
introduced. At first, employees may be unfamiliar with their tasks, parts may not fit
together properly, or other problems may arise. Gradually, many of these problems are
sorted out, and workers are able to perform their tasks in less time. As time goes by, better
methods will be developed, so that task times can be reduced even further. The end result
is that the time it takes to make each unit of the product will decrease as the cumulative
number of units produced increases, as shown in Exhibit S3.1.

EXHIBIT S3.1 1,000

75 Percent Learning 900
Curve
800
Hours required per unit

700

600

500

400

300

200

100

0
50 100 150 200 250 300 350 400 450 500

Cumulative number of units

1
2 PART I BUILDING CAPABILITIES TO COMPETE GLOBALLY

The curve shown in Exhibit S3.1 is called a learning curve and indicates how the time
required per unit of product decreases as the cumulative number of units produced
increases. This curve is based on the formula
Yn = Y1nb
where
Yn = the time it will take to produce the nth unit
Y1 = the time it took to produce the first unit
n = number of units
r = learning factor
log r
b=
log 2

Although this formula may look formidable, what it actually indicates is that the time per
unit will decrease by a constant factor every time the cumulative number of units pro-
duced doubles. The learning factor indicates the relation between these two times.

PROBLEM A learning factor of .8, which is usually referred to as an 80 percent learning curve,
would mean that the time it takes to produce the second unit is only 80 percent of
the time it took to produce the first unit. Then the time it takes to produce the fourth
unit will be 80 percent of the time it took to produce the second, and so on. For a job
that required ten hours to produce the first unit, the time for each successive unit
with an 80 percent learning curve would be
Unit Number (N) Time per Unit (Hours)
1 10
2 .8 (10) = 8
4 .8 (8) = 6.4
8 .8 (6.4) = 5.12
16 .8 (5.12) = 4.096

Unfortunately, the approach used above to determine the time per unit when the
cumulative number of units doubles cannot be used to determine how long it should
take to produce the third unit, the fifth unit, and so on. In those situations, we must
resort to the learning-curve formula.

PROBLEM An aircraft company is producing a new commercial jet. Based on past experience,
the learning factor is .7, and it is expected that the first unit will require 1,000 hours
to produce. How long should the fifth unit take?

log.7
b=
log 2
.1549
=
.3010
= .5146
Yn = Y1nb
= 1000(5).5146
= 436.8 hours

Thus, the fifth unit should take 436.8 hours to produce.

 CHAPTER 3 SUPPLEMENT LEARNING CURVES 3

These calculations can become rather tedious if they must be performed a large num-
ber of times. Fortunately, tables exist that eliminate the need for the detailed calculation
shown above. Such a table is shown in Exhibit S3.2.

USING A LEARNING-CURVE CHART

Referring to Exhibit S3.2, you can see that the time shown across the first row, correspon-
ding to unit number 1, is 1.000 for all learning factors. Now looking down the Unit Time
column for an 80 percent learning curve, you can see the unit time for unit number 2 will
be .800 and the unit time for unit number 4 will be .640. Thus, the numbers given all show
the time required to produce each unit as a proportion of the time it took for the first unit.
If the first unit required ten hours and a learning factor of .8 is in effect, the time required
for unit number 5 will be
.596 10 hours = 5.96 hours
The column labeled Total Time indicates the cumulative time it will take to produce
the corresponding unit number and all preceding units. Thus, the total time to produce
the first through fifth units with an 80 percent learning curve and ten hours required for
the first unit will be
3.738 10 hours = 37.38 hours
Exhibit S3.2 can be used to calculate the time required to produce each unit, up to unit
number 3,000 for common learning factors. Further, the table will tell you the total time
required to produce that number of units.

ESTIMATING THE LEARNING FACTOR

One problem faced in using the learning-curve chart is determining which learning curve
rate to use. In many organizations, industrial engineers are trained to select learning fac-
tors based on those commonly used in a particular industry or for certain operations. For
example, aircraft assembly operations have been found to follow an 80 percent learning
curve. If historical data are available, they can also be used to estimate the learning factor
by rearranging the learning curve formula to

Yn
nb =
Y1

Taking logs of both sides, we obtain

Y
b log n = log n
Y
1

We can then solve for b as follows:

log (Yn Y1 )
b=
log n

The definition of b can then be used to determine its value.

4 PART I BUILDING CAPABILITIES TO COMPETE GLOBALLY

(b = .415) (b = .322) (b = .234) (b = .152)

EXHIBIT S3.2
Unit Unit Total Unit Total Unit Total Unit Total
Learning-Curve Chart Number Time Time Time Time Time Time Time Time

1 1.000 1.000 1.000 1.000 1.000 1.000 1.000 1.000

2 .750 .750 .800 1.800 .850 1.850 .900 1.900
3 .634 2.384 .702 2.502 .773 2.623 .846 2.746
4 .562 2.946 .640 3.142 .723 3.345 .810 3.556
5 .513 3.459 .596 3.738 .686 4.031 .783 4.339
6 .475 3.934 .562 4.229 .657 4.688 .762 5.101
7 .446 4.380 .534 4.834 .634 5.322 .744 5.845
8 .422 4.802 .512 5.346 .614 5.936 .729 6.574
9 .402 5.204 .493 5.839 .597 6.533 .716 7.290
10 .385 5.589 .477 6.315 .583 7.116 .705 7.994
11 .70 5.958 .462 6.777 .570 7.686 .695 8.689
12 .357 6.315 .449 7.227 .558 8.244 .685 9.374
13 .345 6.660 .438 7.665 .548 8.792 .677 10.05
14 .334 6.994 .428 8.092 .539 9.331 .670 10.72
15 .325 7.319 .418 8.511 .530 9.861 .663 11.38
16 .316 7.635 .410 8.920 .522 10.38 .656 12.04
17 .309 7.944 .402 9.322 .515 10.90 .650 12.69
18 .301 8.245 .394 9.716 .508 11.41 .644 13.33
19 .295 8.540 .387 10.10 .501 11.91 .639 13.97
20 .288 8.828 .381 10.49 .495 12.40 .634 14.61
21 .283 9.111 .375 10.86 .490 12.89 .630 15.24
22 .277 9.388 .370 11.23 .484 13.38 .625 15.86
23 .272 9.660 .364 11.59 .479 13.86 .621 16.48
24 .267 9.928 .359 11.95 .475 14.33 .617 17.10
25 .263 10.19 .355 12.31 .470 14.80 .613 17.71
30 .244 11.45 .335 14.02 .450 17.09 .596 20.73
35 .29 12.62 .318 15.64 .434 19.29 .583 23.67
40 .216 13.72 .305 17.19 .421 21.43 .571 26.54
45 .206 14.77 .294 18.68 .410 23.50 .561 29.37
50 .197 15.78 .284 20.12 .400 25.51 .552 32.14
60 .183 17.67 .268 22.89 .383 29.41 .537 37.57
70 .172 19.43 .255 25.47 .369 33.17 .524 42.87
80 .162 21.09 .244 27.96 .358 36.80 .514 48.05
90 .155 22.67 .235 30.35 .348 40.32 .505 53.14
100 .148 24.18 .227 32.65 .340 43.75 .497 58.14
120 .137 27.02 .214 37.05 .326 50.39 .483 67.93
140 .129 29.67 .204 41.22 .314 56.78 .472 77.46
160 .122 32.17 .195 45.20 .304 62.95 .462 86.80
180 .116 34.54 .188 49.03 .296 68.95 .454 95.96
200 .111 36.80 .182 52.72 .289 74.79 .447 105.0
250 .101 42.08 .169 61.47 .274 88.83 .432 126.9
300 .094 46.94 .159 69.66 .263 102.2 .420 148.2
350 .088 51.48 .152 77.43 .253 115.1 .411 169.0
400 .083 55.75 .145 84.85 .245 127.6 .402 189.3
450 .079 59.80 .140 91.97 .239 139.7 .395 209.2
500 .076 63.68 .135 98.85 .233 151.5 .389 228.8
600 .070 70.97 .128 112.0 .223 174.2 .378 267.1
700 .066 77.77 .121 124.4 .215 196.1 .369 304.5
800 .062 84.18 .116 136.3 .209 217.3 .362 341.0
900 .059 90.26 .112 147.7 .203 237.9 .356 376.9
1000 .057 96.07 .108 158.7 .198 257.9 .350 412.2
1200 .053 107.0 .102 179.7 .190 296.6 .340 481.2
1400 .050 117.2 .097 199.6 .183 333.9 .333 548.4
1600 .047 126.8 .093 218.6 .177 369.9 .326 614.2
1800 .045 135.9 .090 236.8 .173 404.9 .320 678.8
2000 .043 144.7 .087 254.4 .168 438.9 .315 742.3
2500 .039 165.0 .081 296.1 .160 520.8 .304 897.0
3000 .036 183.7 .076 335.2 .153 598.9 .296 1,047
 CHAPTER 3 SUPPLEMENT LEARNING CURVES 5

log r
b=
log 2
log r = b log 2
r = 10b log 2

PROBLEM An electronics manufacturer has found that the time needed to produce a certain cir-
cuit board has been decreasing. While it took 4.8 hours to produce the first board, the
125th one required only .95 hour. What learning factor is in effect?

log (Yn Y1 )
b=
log n
log(.95 / 4.8)
=
log(125)
.703518
=
2.09691
= .33555
r = 10b log 2
= 10(.3355 log 2)

= 10(.101)
= .79

Thus, a learning curve rate of 79 percent is in effect.

PRICING UNDER THE LEARNING-CURVE EFFECT

When the learning curve is in effect, a company can find it difficult to determine its labor
costs because the labor time required per unit will be decreasing. However, the values for
total time in the learning-curve chart can be used to determine average labor time per unit.

PROBLEM The company of Forges et Ateliers is a French metalworking shop located in the city
of Clermont-Ferrand. It recently received an order to produce 100 units of a new type
of forging. Based on past experience, the company expects an 85 percent learning
curve to be in effect. If the first unit required 2.4 direct labor hours and employees
are paid at the rate of FF (French francs) 70 per hour, what will be the average direct
labor cost on the entire order?
Using the learning-curve chart, the total time for 100 units will be
2.4(43.75) = 105 hours
The total cost for this number of hours will be
FF 70(105) =FF 7,350
The average direct labor cost per unit will be total cost divided by number of units,
or

FF 7350
= FF 73.5 per unit
100
6 PART I BUILDING CAPABILITIES TO COMPETE GLOBALLY

SUMMARY
According to the learning-curve formula, the time required to produce one unit of a
product decreases by a constant percentage each time the cumulative number of units
produced is doubled.
By rearranging the learning-curve formula, historical data can be used to estimate the
learning factor.

KEY TERMS
learning curve learning factor

SOLVED PROBLEMS
1. A company has estimated that a learning curve of 80 percent applies to its operations.
The first unit required four hours.Using the learning-curve formula, determine how
long the second and third units will take to produce Using the learning-curve chart in
Exhibit S3.2, determine how long it will take to produce the first 100 units.
SOLUTION

a. The second unit should take only 80 percent as long to make as the first unit if an
80 percent learning factor is in effect.

Time for second unit = .80 x time for first unit

= .80 x 4 hours
= 3.20 hours
b. Time for the third unit will be calculated using the formula

log r log.8
b= =
log 2 log 2
.0969
=
.3010
= .3219
Yn = Y1nb
= 4(3).3219
= 2.81 hours

c. In Exhibit S3.2, we go to the 80 percent column and follow down Total Time to
the row for unit number 100. The value there is 32.65. This is then multiplied by
the time it took for the first unit.

32.65 x 4 hours =130.6 hours to make the first 100 units

2. An engineering consulting firm has begun using a new computer graphics program to
design bridge trusses. The company has noticed a learning curve in effect, as its first
truss required ten hours to design, but the twenty-eighth one took only six hours.
a. What learning factor is in effect?
b. Determine the average time per unit for the first fifty bridge trusses designed,
based on the learning-curve rate.
 CHAPTER 3 SUPPLEMENT LEARNING CURVES 7

SOLUTION

a.

Y1 = 10, Yn = 6, n = 28
log (Yn Y1 )
b=
log n
log(6 /10)
=
log(28)
.22185
=
1.447158
= .1533
r = 10b log 2
= 10(.1533 log 2)

= 10(.046)
= .90

b. Based on a learning-curve rate of 90 percent, the learning-curve chart indicates

that the total time for the first fifty units will be

10(32.14) = 321.4 hours

The average time per unit will be

321.4 hours
= 6.428 hours per unit
50 units

PROBLEMS
1. A company has determined from past experience that its learning-curve percentage is
85 percent. If it takes 1,000 hours to produce the first unit, how long should the sec-
ond, fourth, and eighth units each take?
2. The Nicholas Tool Company has just introduced a new line of CNC lathes. Based on
past experience, the company expects a 90 percent learning curve to apply to the man-
ufacturing time for these lathes. The first unit required 400 hours to produce.
Nicholas estimates that each hour of production time costs an average of $30. Based
on this, how long will it take to produce the companys first three units, and what will
be the total production cost of these machines?
3. The Qewb Brothers provide tax assistance services. Each year they hire a new group of
employees and train them in preparing tax forms. Based on past experience, the time
it takes one of these employees to prepare a standard tax return follows a 75 percent
learning curve. However, Herbie Qewb, one of the brothers, has designed a new train-
ing program to lower this to 70 percent. If the first tax return takes an average of two
hours to prepare and these employees are paid $10 per hour, what would be the cost
savings per employee on the first four returns if the new training program is adopted?
4. Arlene Crouch has become interested in building radio-controlled (R/C) airplanes.
Her first plane took 100 hours to build. However, Arlene became more proficient and
found that her tenth plane required only 53.85 hours. What is Arlenes learning factor
for building R/C airplanes?
8 PART I BUILDING CAPABILITIES TO COMPETE GLOBALLY

5. Steve Tasks has just started up a new computer company that manufactures the
LaST computer. Steve found the first LaST computer assembled in his new plant
required thirty-eight direct labor hours to produce. Based on past experience, Steve
expects an 80 percent learning curve to apply. If direct labor costs $12 per hour, what
will be the average cost of direct labor on Steves first fifty LaST computers?
6. The Computer Company, a computer sales and service operation, has just contracted
with a regional insurance company to install a local area network (LAN) involving ten
computers in the insurance companys headquarters office. Part of the network
installation involves installing a network board and software in each of the ten com-
puters. Employees of the Computer Company have no previous experience with this
particular installation. It is estimated that the first unit will require thirty minutes of
installation time.
a. Draw graphs of the installation time required for each of the ten computers, using
75 percent and 85 percent learning curves.
b. Determine the total cumulative installation time for each learning-curve rate.
7. Memory Associates has just developed a new supercomputer. However, the supercom-
puter business has become extremely competitive, and Memory Associates wants to
introduce its new product at a price that will undercut the competition. The first unit
produced required $1 million for materials and 200,000 hours of direct labor at $15
per hour. If Memory Associates prices its new supercomputer at $2 million per unit,
how many units must be produced and sold before the selling price will cover the
direct labor and material costs if an 80 percent learning curve is in effect?

MINI-CASES

Nerco Machining Co.

The Nerco Machining Company is a job shop operation that does custom machining
work. Recently, the company has developed a contract for specialty machining work with
a new customer. It is anticipated that if Nercos work is satisfactory to this new customer,
a long-term relationship will be developed. Such a relationship would be very beneficial
to Nerco, probably resulting in at least a million dollars worth of work each year.
This contract calls for some machining of a special molybdenum alloy. Nerco has pre-
viously worked with similar materials, although not this precise alloy. In addition, the par-
ticular machining operations involved are slightly more complex than the usual work that
Nerco does for its customers. However, in developing the bid for this job, Nerco had used
data it collected from similar jobs and estimated a labor cost of $22.50 per piece.
Nercos employees are skilled machinists who are paid on a standard-hour basis. Their
base wage rate is $18 per hour, and each machinist works a forty-hour week. Overtime work
is paid at time and a half. Due to this high cost, overtime is extremely rare and has been used
in the past only when an important job would be late without the use of overtime.
For the new contract, Nerco has set the standard time as 1.25 hours per piece, which
was based on past experience with similar jobs. However, the companys machinists have
been complaining that the standard time is too low. They argue that this job is much more
complex and the material more difficult to work with than that used for previous jobs. In
fact, the first part produced took 1.85 hours of actual machining time, and the second part
required 1.5 hours to machine.
For the third part, Brock Thurston, the shop foreman, requested that a time study be
conducted. The cycle time for this third part was found to be 1.3 hours, and the time-study
 CHAPTER 3 SUPPLEMENT LEARNING CURVES 9

noted that the machinist appeared to be having some trouble with machining the part and
thought that performance would improve as more experience was gained with the job. The
allowance factor for this job is 20 percent.
Brock Thurston is still unsure. Even though the times are dropping for this job, they
are still above the standard. He wonders whether the standard should be reset due to the
uniqueness of the work required under the new contract. He is also worried because the
first ten pieces of this order must be completed within another 7.5 regular time hours-a
time that seems unreasonable based on how long it took to finish the first three. A late
delivery could jeopardize any future orders from this customer. Brock wonders if he should
plan to schedule overtime to get the job done.
1. Does a learning curve appear to be present? Estimate the learning factor.
2. How long should it take to complete the first ten units?
3. Should overtime be scheduled?

Silicon Valley Semiconductor

Silicon Valley Semiconductor (SVS) manufactures microprocessor chips used in personal
computers. Due to the many manufacturers in the United States and overseas, pricing for
these chips has become cutthroat, with the industry experiencing a 25 percent decrease in
chip prices each year.
Brenda Thornton, vice-president of finance for SVS, has become increasingly con-
cerned about whether her company can continue to compete effectively in this market.
SVS is a relatively small producer and is having trouble generating a reasonable profit,
given existing costs and market prices.
As operations manager, you have been asked to respond to Brendas concern. You
know that SVS began producing chips about a year ago, and has produced about 100,000
chips since then. Based on the past years results, SVS is operating on an 80 percent learn-
ing curve. You also know that materials account for roughly 50 percent of the cost of a
chip, with direct labor accounting for the other half.
As vice-president of finance, Thornton is also aware of the 80 percent learning rate for
SVS. One question she has raised is whether SVS can follow the industrys 25 percent price
reduction when it operates on an 80 percent learning curve. Further, she has pointed out
that this learning factor applies only to the direct labor cost, which accounts for only half
of product cost. It is not expected that material costs will change appreciably.
1. Explain how an 80 percent learning curve could produce a cost decrease of 25
percent per year.
2. Determine what increase in volume would have to be produced each year to
generate such a cost decrease.
3. Based on the fact that direct labor accounts for 50 percent of product cost, how
many units must SVS produce each year for the next three years to maintain a
25 percent decrease in product cost each year?

SELECTED BIBLIOGRAPHY
Argote, Linda and Epple, Dennis. Learning Curves in Manufacturing Science 247 (February 1990): 920-24.
Camm, Jeffrey. A Note on Learning Curve Parameters Decision Sciences 16, no. 3 (Summer 1985): 325-27.
Yelle, Louis E. The Learning Curve: Historical Review and Comprehensive Survey Decision Sciences 10, no. 2
(April 1979): 302-28.