GMS 401 Chapter Notes - Chapter 6: Learning Curve
13 Mar 2017
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Learning curves are based on the premise that people and organizations become better at their tasks as the tasks are repeated: a learning curve graph displays labour-hours per unit versus the number of units produced. From it we see that the time needed to produce a unit decreases, usually following a negative exponential curve, as the person or company produces more units. Learning curves are useful for a variety of purposes. Labour forecasting, scheduling, establishing costs and budgets: external. Simplest approach: each time production doubles, labour per unit declines by a constant factor, known as the learning rate. So if we know the learning rate is 80% and that the first unit produced took 100 hours, the hours required to produce the 2nd, 4th, 8th, and 16th units are as follows. Lower costs are not automatic; they must be managed down: when a firm"s strategy is to pursue a curve steeper than the industry average, it does this by.
