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Learning curve
PRESENTED TO
PROF SURESH V.
CHANDRA
Presented by
Nagasai(040)
L. j. Monica(038)
For academic purpose only

6/25/16

Introduction

Learning curves are used to forecast the production time an labour cost
in

circumstances where a work force makes a new products and

Improves its

efficiency with experience and learning

Learning curves are based on the premise that people and organizations
become better at their task as the tasks are repeated

The learning effect is that as the work force learn form experience how to
make the new product, there is a big reduction in the time to make
additional units

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Introduction

A learning curve graph displays labor-hours per unit versus the

number of units produced

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Types of learning

Individual Learning

Improvement when individuals gain a skill or efficiency by repetition of a

job

Organizational Learning

Improvement from the groups of individuals from repetition and changes in

administration, equipment, and product design

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Applications of learning curve(1/2)

Pricing Decisions

It requires the ability of the management to use the learning effect to

forecast and make the cost reductions and obtain a considerable lead over
the competitors by giving better prices.

Work Scheduling

Useful in the management of delivery orders and related schedules.

Scheduling labor work requirements

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Applications of learning curve(2/2)

Pricing Contracts

The

LC has been quite useful in determining the likely costs relating to

various contracts. It provides a rational basis for price negotiation and
cost control.

Setting Incentive Wage Rates

The

LC concept is applied in determining incentive wage rates across

the industries.

Inventory Management

The

LC concept can be used in the planning, budgeting and purchasing

of inventory

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Approaches

The three approaches to solve the learning curve problems are:

Arithmetic approach

Logarithmic approach

Learning curve coefficient approach

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Advantages

It will assist in planning for personnel both in terms of number and the cost

It will assist in product pricing by providing better -cost estimates

It can assist in cost control

It can assist in setting labor standards and reduce labor variances

Learning curve can assure better work scheduling and lead to accurate
delivery schedules that would meet customer satisfaction

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Limitations

Before using learning curves, some cautions in order:

Learning curves differ from company to company, as well as industry to

industry, estimates for each organization should be developed rather than
applying someone elses.

Any changes in personnel, design or procedure can be expected to alter

the learning curve

While workers and processes may improve, the same learning curves do
not always apply to indirect labor and material

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Illustrative model

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It was found that the cumulative average time per unit decreased by a fixed percentage
each time the cumulative production doubled.
In automobile industry, the percentage by which cumulative average time per unit
decreased was typically 80%. Similarly different learning rates were noted for different
industries.
Let us examine an example of production where learning rate is noted at 90%:
units
1
2

For academic purpose only

cumulative production
avg.time/unit(hrs.) time(hrs.)
100
100
90.00 (100x90%)
190

81.00 (90x90%)

271

72.90 (81x90%)

343.9

16

65.61 (72.90x90%)

409.51

32

59.05 (65.61x90%)

568.56

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From Learning Curves to Performance

Improvement

Proper selection of workers

Proper training

Motivation

Work specialization

Provide quick and easy access for help

Allow workers to help redesign their tasks

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Summary

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The learning curve is a powerful tool for the operations manager

This tool can assist operations managers in determining future cost

standards for items produced as well as purchased

In addition, the learning curve can provide understanding about company

and industry performance

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References

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www.ebscohost.com

www.hbr.org

www.journals.rcni.com

www.referenceforbusiness.com

www.slideshare.in

Jay-heizer barry -render-operations management 10 th edition

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Thank you

For academic purpose only

6/25/16