Operations Management
Introduction To Learning Curves Module E
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
E-1
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Learning
Learning: Relatively permanent change in behavior due to repetition &
rewards
2 Types of learning
Individual Organizational First observed in 1936 in airplane industry
Results in learning curve effect
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
E-2
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Learning Curve Effect
Time needed to produce a unit decreases with each additional unit
Time needed decreases at a decreasing rate as cumulative production increases Decrease in time follows an exponential curve called learning or experience curve
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
E-3
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Learning Curve Graph
Hours per unit, TN
120 100 80 60 40 20 0 0 100
TN = (100)(N log.90/log2)
Cumulative units, N
E-4
200
300
400
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Factors Affecting Learning Curves
Material Workers Skills Work Methods
Product Design Continuous Improvement Methods
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
Learning Curve
Tools
Process Design
E-5
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Learning Curves Vary by Product and Industry
Aircraft Assembly (1925-57): 80%
Calculator (197578): 74%
1995 Corel Corp.
Heart Transplants (1985-88): 79%
1995 Corel Corp. PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
E-6
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Learning Curve Applications
Internal
Determine labor standards Establish labor costs & budgets Scheduling Purchasing Subcontracting Determine volume-cost changes Evaluation of company and industry performance
E-7
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
External
Strategic
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
Criticisms of Learning Curves
Lack strong theoretical justification Intermingle variables
1984-1994 T/Maker Co.
Learning effects Economies of scale Technological improvements
Focus on cost not profit
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
E-8
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Developing Learning Curves
Arithmetic approach
Uses relationship: T2N = L * TN Useful only if values doubled
Logarithmic analysis
Uses relationship: TN = T1 N log L / log 2 Can find time for any value of N
N = Unit of interest; T1 = Time for unit 1
Learning curve coefficients approach
Uses relationship: TN = T1C (from Table)
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
E-9
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Learning Curve Coefficients Table
Unit (N) 1 2 3 4 : : 80% Unit Total Time Time 1.000 .800 .702 .640 :
E-10
Table E.3 P. 838
85% Unit Total Time Time 1.000 .850 .773 .723 : 1.000 1.850 2.623 3.345 :
1.000 1.800 2.502 3.142 :
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Excel OM Arithmetic Sample
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
E-11
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Learning Curves Determining Time Example
Youre a planner for Viking Ships. The first boat took 125,000 labor-hours to make. Boats 2 & 3 were produced with a learning factor of 85%. How long will the 4th boat take so that raiding can begin?
1995 Corel Corp.
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
E-12
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Arithmetic Approach
Formula: T2N = L * TN
1st unit:
2nd unit:
T1 = 125,000 hr.
T2 = L * T1 = .85 * 125,000 = 106,250 hr. T4 = L * T2 = .85 * 106,250 = 90,312 hr.
E-13
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
4th unit:
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
Logarithmic Approach
Formula: TN = T1 (N log L / log 2)
N = Unit of interest T1 = Time for unit 1 L = Learning rate
T1 = 125,000 hr. 4th unit: T4 = T1 (N log L / log 2) = 125,000 (4 log .85 / log 2) = 90,312 hr.
E-14
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
Coefficient Approach
Formula: TN = T1 C
N = Unit of interest T1 = Time for unit 1 C = Learning curve coefficient from table
T1 = 125,000 hr.; C = .723 from Table E3 4th unit: T4 = T1 C = 125,000 * (.723) = 90,375 hr. (rounding C)
E-15
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
Learning Curves Determining Rate Example
If you Know the First Ship took 125,000 hours to construct, And the 4th ship took 100,000 hours to construct What will your Learning Curve Be? Excel OM >> Learning Curves >> Determining The Rate
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
E-16
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Learning Curves and Strategy
Hours per unit 120 100 80 60 40 20 0 0
For a low price, high volume strategy, a firm must lower unit hours & costs to maintain profit margins (i.e., steeper curve).
100 200 Cumulative units
E-17
300
400
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
Learning Curves and Strategy
To pursue a learning curve steeper than that of the industry, a firm must:
follow an aggressive pricing policy focus on continuing cost reduction and productivity improvement build on shared experience keep capacity growing ahead of demand
PowerPoint presentation to accompany Operations Management, 6E (Heizer & Render)
E-18
2001 by Prentice Hall, Inc., Upper Saddle River, N.J. 07458
