LEARNING CURVE

GROUP MEMBERS

Timsy Aggarwal - 7404 Forum Anam - 7405 Rucha Asolkar - 7407 Kinjal Gandhi - 7427 Srushti Kshirsagar - 7449

Learning curve

“The term learning curve refers to a graphical representation of the changing rate of learning for a given activity or tool.”

INTRODUCTION

Also called improvement curve or progress curve

Graphical representation rate of improvement rate of change in average cost Employed in setting incentive rate

schemes Relation between cumulative output and

average unit cost

EXAMPLE

An 80 percent learning curve means the per unit average cumulative cost (in hours or dollars) falls to 80 percent of the previous per unit average cumulative cost as the cumulative output doubles.

History

1885- Hermann Ebbinghaus, the 1st person time required to memorize a nonsense

syllable increased sharply as the number of syllables increased

1934- Arthur Bills, psychologist discussed the properties of different types

of learning curves 1936 - Theodore Paul Wright effect of learning on labour productivity in

the aircraft industry mathematical model of the learning curve

AIRCRAFT INDUSTRY

1st copy of new airplane - $100million

2nd copy of new airplane - $80million

4th copy of new airplane - $64million

8th copy of new airplane -$51 million

Types of learning curve

Steep learning curve.

Flat or gradual learning curve.

Steep learning curve:-

Large gain of knowledge in the early stage.

Rules are simple and quickly learn

Difficult skill to learn.

Harder to climb.

Eg:- Chess

Flat or gradual learning curve:-

Rate of knowledge is slowly spaced.

Gives ample time to imprint the procedure or skills.

LEARNING CURVE FORMULATION

Margin cost model

Formula :-

Ycx = ax-b

where, Ycx = average cost of the first x units, a = the first unit cost, x = the cumulative unit number output,

b = the learning elasticity, which defines the slope of the learning curve.

Direct labour hour model

Formula:

Y = KXn

where, Y = the number of direct labor hours required to

produce the Xth unit,K = the number of direct labor hours required to produce the first unit,X = the cumulative unit number,n = log ϕ/log 2,ϕ = the learning rate, and1 - ϕ = the progress ratio.

Learning curve

Positive Curves

Learn slowly at first and then faster later on.

Learning is accelerating.

Eg: student learning calculus.

Negative Curves

Learn quickly at first and then our progress slows.

Learning is slowly.

Eg: a child learning to tie her shoes.

MANAGERIAL USES

Pricing

Production

Financial planning

Modernise or replace decisions

OTHER USES

• Capacity analysis and resource planning.• Cost-reduction proposals pricing.• Direct labour cost.• Estimation of production-line performance.• Break even estimation.• Cost estimation, pricing and staff planning.• Incentives for aggressive pricing in early

phases of a product life cycle.

LEARNING CURVE EFFECT

“The learning effect states that the more often a task is performed, the less time will be required on each iteration”.

Eg:- aircraft manufacturing, ship building, bridge construstion, new product development,etc.

REASONS FOR THE EFFECT OF LEARNING CURVE

Labour efficiency Standardisation, specialisation and

methods of improvement Technology driven learning Changes in resource mix Product redesign Value chain effects Shared experience effect

LEARNING CURVE - zigzag

LIMITATIONS

Depends on many assumptions Best results only in static system Difficulty in application Zigzag curve Old technique Money and time constraints Not accurate

Case-study

Douglas Aircraft.

Factors that affecting learning curves:-

a) The inherent capacity of an operation to improve.

b) The degree to which the capacity is exploited.

Conclusion