Lecture Operations and supply chain management: The Core (3/e) – Chapter 4a: Learning curves

After reading the material in this chapter, you should be able to: Understand the concept of capacity and how important it is to manage capacity, explain the impact of economies of scale on the capacity of a firm, understand how to use decision trees to analyze alternatives when faced with the problem of adding capacity, describe the differences in planning capacity between manufacturing firms and service firms.

Learning Curves Chapter 4a McGraw­Hill/Irwin         Copyright © 2013 by The McGraw­Hill Companies, Inc. All rights reserved Learning Curves   A learning curve is a line that displays the relationship between unit production and cumulative number of units produced One way of learning is “learning by doing”   As plants produce more, they gain experience in the best production methods, which reduces their costs in a predictable manner This is observed as a decline in production costs (by a specific percentage) each time cumulative production doubles  Learning rates are unique and depend upon the nature of the process 4a­2 Learning Curves Graphed on a logarithmic scale, the learning curve is a straight line 4a­3 Learning Curve Assumptions 4a­4 Learning Curves   Learning curves can be developed from an arithmetic tabulation, by logarithms, or some other curve-fitting technique The improved performance can be thought of in two ways   Time per unit – shows the decrease in time required for each successive unit Output per time period – increase in number of units produced over a fixed time period 4a­5 Learning Curves A 90% learning curve implies that each time cumulative production doubles the cost per unit is reduced by 10% Differences in learning curves can have dramatic effects over time! 4a­6 Learning Curves  A logarithmic plot allows linear extrapolation and more accurate interpretation Excel: Learning Curve Ca 4a­7 Learning Curves – Logarithmic Analysis  The relationship between total number of units produced and learning can be expressed mathematically Excel: Learning Curves 4a­8 Learning Curves – Logarithmic Analysis  Example  For an 80% learning curve, if the first unit required 100,000 hours, how many hours will the eight unit require? 4a­9 Learning Curve Tables  When the learning percentage is known, tables can be used to estimate labor hours for a specific unit  Multiply the initial unit labor hours by the appropriate value from the table Example: With an 80% learning rate, the eighth unit should take 0.512 times the initial unit time If Y = 100,000, Y = 100,000(0.512) = 51,200 4a­10 Learning Curve Example From table 4A.5, with an 80% improvement ratio unit 11 should take between 0.4765 and 0.4493 times the original time Interpolate to obtain a factor of 0.4629 Overick has been slightly overoptimistic 4a­11 Learning Curve Example Excel: Learning Cur 4a­12 Managerial Considerations 4a­13 Managerial Considerations 4a­14 ... Excel: Learning Curve Ca 4a­7 Learning Curves – Logarithmic Analysis  The relationship between total number of units produced and learning can be expressed mathematically Excel: Learning Curves. .. production doubles  Learning rates are unique and depend upon the nature of the process 4a­2 Learning Curves Graphed on a logarithmic scale, the learning curve is a straight line 4a­3 Learning Curve.. .Learning Curves   A learning curve is a line that displays the relationship between unit production and cumulative number of units produced One way of learning is ? ?learning by doing”