GMS 401 Midterm: GMS401 TERM TEST 2 NOTES

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Global Management Studies
GMS 401
Wally Whistance- Smith

CHAPTER 6 Learning Curves Sometimes called experience curves The premise that people and organizations get better at their tasks as the tasks are repeated Learning Curve Effect Time per repetition decreases as the number of repetitions increases Human performance improves when activities are done repetitively Factors Affecting Learning o Actual worker Learning Increasing skills, reducing work, etc. o Preproduction factors Selection of appropriate tooling and equipment Proper design Amount of effort spent prior to the start of the work o Changes after production as begun Methods, layout, tooling, support services, design o Management input Improvements in planning, scheduling, motivation, and controlling done by managers T x Ln= Time required for the nthunit o T = unit costunit time of the 1 unit o L = learning curve rate o N = number of times T is doubled 70 L: 30 decrease in the unit time with each doubling of units produced 90 L: corresponding 10 rate of improvement 100 L: no decrease in unit time at all Learning : slope of the learning curve Other purposes of using learning curves o Internal: Labour forecasting, scheduling, establishing costs and budgets o External: Supplychain negotiations o Strategic: Evaluation of company and industry performance, including costs and pricing Arithmetic Approach o Simplest approach, uses the production doubling equation o T x L Logarithmic Approach o Determine labour for any unit, Tn o T n= T1(Nb) Tn= time for the thunit st T1= time for the 1 unit B = log of the learning rate log 2 = slope of the learning curve Coefficient Approach o Uses a table to perform the N bcalculation o T n= T1C o C = learning curve coefficient found in table 6.3 Strategic Implications of Learning Curves To pursue a strategy of a steeper curve than the rest of the industry, a firm can: o Follow an aggressive pricing policy o Focus on continuing cost reduction and productivity improvement o Build on shared experience o Keep capacity ahead of demand Limitations of Learning Curves
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