Operations and Supply Chain Management The Core

114 OPERATIONS AND SUPPLY CHAIN MANAGEMENT
CHAPTER 4A:
LEARNING CURVES
Learning Objectives
LO4A–1 Understand what a learning curve is and where learning curves are applicable.
LO4A–2 Plot and analyze learning curves.
THE LEARNING CURVE
LO4A–1
Understand what
a learning curve
is and where
learning curves are
applicable.
Learning curve
A line displaying the
relationship between
the cumulative
number of units
produced and the
time or cost to
produce the unit.
A well-known concept is the learning curve. A learning curve is a line displaying the
relationship between unit production, time and cost, and the cumulative number of units
produced. As plants produce more, they gain experience in the best production methods,
which reduce their costs of production in a predictable manner. Every time a plant’s cumulative
production doubles, its production costs decline by a specific percentage depending
on the nature of the business. Exhibit 4A.1 demonstrates the effect of a learning curve on
the production costs of hamburgers.
Learning curves can be applied to individuals or organizations. Individual learning is
improvement that results when people repeat a process and gain skill or efficiency from
their own experience. That is, “practice makes perfect.” Organizational learning results
from practice as well, but it also comes from changes in administration, equipment, and
product design. In organizational settings, expect to see both kinds of learning occurring
simultaneously and often a single learning curve describes the combined effect.
exhibit 4A.1
The Learning Curve
a. Costs per unit produced fall by a specific percentage
each time cumulative production doubles. This
relationship can be expressed through a linear scale, as
shown in this graph of a 90 percent learning curve:
b. It can also be expressed through logarithms:
Cost or
price per
unit ($)
.32
.30
.28
.26
.24
Cost or
price per
unit ($)
.32
.30
.28
.26
.24
(A Log-Log Scale)
0 400 800 1200 1600
0 200 400 800 1600
Total accumulated production of units (1,000)
Total accumulated production of units (1,000)