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Learning Curve Analysis for Manufacturing

The document outlines the analysis of a contract manufacturing project for assembling specialized devices, detailing learning rates, time estimates for units, and productivity improvements. It concludes that the project should not be accepted due to higher calculated labor hours compared to the client's estimate. Additionally, it discusses production capacity, estimates for subsequent orders, and risks associated with relying on learning curve estimates for project planning.

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augustvanessa-89
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48 views2 pages

Learning Curve Analysis for Manufacturing

The document outlines the analysis of a contract manufacturing project for assembling specialized devices, detailing learning rates, time estimates for units, and productivity improvements. It concludes that the project should not be accepted due to higher calculated labor hours compared to the client's estimate. Additionally, it discusses production capacity, estimates for subsequent orders, and risks associated with relying on learning curve estimates for project planning.

Uploaded by

augustvanessa-89
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

2. You are a senior analyst at a contract manufacturing firm.

A new client has approached you


with a request to assemble 30 units of a specialized device. The client estimates that each unit
should take approximately 18 hours to assemble and is willing to pay based on that estimate.
However, your team has reported that the first unit took 32 hours and the second unit took 27.2
hours. You want to ensure profitability and impress your supervisor, but you must also be
cautious about accepting projects that may result in losses.

a)​ Calculate the learning rate based on the first two units. Estimate the time required for the
3rd and 30th units. What is the percentage improvement in productivity from the 1st to
the 30th unit?

T_1 = 32, T_2 = 27.2

r = T_2/T_1 = 27.2/32 = 0.85 = 85%

b = log_2(0.85) = -0.23446525

T_3 = 32 x 3^-0.23446525 = 24.733 hours = 24.73 hours


T_30 = 32 x 30^-0.23446525 = 14.415 hours = 14.42 hours

Productivity Improvement: 32 - 14.415/32 = 0.5495 x 100 = 54.95%

Learning Rate: 85%


Time Required for 3rd Unit: 24.73h
Time Required for 30th Unit: 14.42h
Productivity Improvement: 54.95%

b)​ Estimate the total labour hours required to complete all 30 units. What is the average
time per unit? Should you accept the project based on the client's offer? Justify your
answer.

T_1/b+1 = 32/-0.2345+1 x 30^-0.2345+1


=32/0.7655 x 30^0.7655 = 564.86 hours

Estimate: 18 x 30 = 540

Average Time: hours/n = 564.86/30 = 18.83 hours/unit

No, you should not accept the offer because the estimate is 540 hours, and the
calculation was 564.86 hours, which makes this unprofitable.

c)​ The client returns with a request for 30 additional units. Estimate the time for the first and
30th units in the second batch. What is the total labour time and average time per unit for
this second order?

1
First Unit Batch: T_31 = 32 x 31^-0.2345 = 31^-0.2345 = 0.4469672294 x 32 = 14.30
Second Unit Batch: T_60 = 32 x 60^0.2345 = 60^-0.2345 = 0.3828454868 x 32 = 12.25

Total Hours: 32/-0.2345+1 x 60^-0.2345+1 = 960.2394 = 960.24 hours


NEW-OLD = 960.24-564.86 = 395.38 hours
Average Time per Unit: 395.38/30 = 13.1793 = 13.18 hours

d)​ Your team can allocate 825 labour hours per month to this product. What is your
production capacity for the first month?

32 x n^-0.2345
Total Hours(n) = (32 x n^-0.2345) x n = 32 x n^1-0.2345 = 32 x n^0.7655
32 x n^0.7655 = 825
n^0.7655 = 825/32 = 25.781
N = (25.781)^1/0.7655 = 69.763 = 69.76

The production capacity for the first month is about 70 units.

e)​ You have another product with an improvement rate of 22% and a first unit time of 24
hours. Estimate the time required for the 6th unit.

1-0.22 = 0.78 x 100 = 78%

T-n = T_1 x n^b

ln(0.78) = -0.2484613593
ln(2) = 0.6931471806
b = -0.358

T_6 = 24 x 6^-0.358 = 0.526528462 x 24 = 12.64 hours

f)​ Discuss three risks associated with relying heavily on learning curve estimates for
project planning.

1. Delays with equipment breakdowns and supply chain issues can lead to missing
deadlines and high costs
2. Changes in personnel design or procedure can change the learning curve
3. If designs, materials, or assembly changes occur, the learning curve can restart and
the earlier estimates may not be accurate

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