LEARNING CURVE
WHAT IS LEARNING CURVE?
• A learning curve is a concept that graphically depicts the
relationship between the cost and output over a defined
period of time, normally to represent the repetitive task of
an employee or worker.
• Learning curve reflects the increase rate at which people
perform tasks as they gain experience.
WHAT IS LEARNING CURVE?
• The learning curve is a visual representation of how long it
takes to acquire new skills or knowledge.
• In business, the slope of the learning curve represents the
rate in which learning new skills translates into cost savings
for a company.
• The steeper the slope of the learning curve, the higher the
cost savings per unit of output.
WHAT IS LEARNING CURVE?
• Ordinarily, the curve is expressed as a percentage of
reduced time to complete a task for each doubling of
cumulative production. Research has shown learning curve
percentages between 60% to 80%. In other words, the time
required is reduced by 20% to 40% each time cumulative
production is doubled, with 20% being common.
• One common assumption made in a learning curve model
is that the cumulative average time per unit is reduced by a
certain percentage each time production doubles.
EXAMPLE
Given an 80% learning curve model based on the first
assumption stated above, the following performance is
expected during the early stages of the manufacture of a
new product:
Cumulative Number of Tasks Cumulative Average Time per Unit
100 3.0
200 2.4 (3.0 x 80%)
400 1.92 (2.4 x 80%)
800 1.536 (1.92 x 80%)
1,600 1.228 (1.536 x 80%)
UNDERSTANDING LEARNING
CURVES
The learning curve provides measurement and insight
into all the above aspects of a company. The idea behind
this is that any employee, regardless of position, takes time to
learn how to carry out a specific task or duty. The amount of
time needed to produce the associated output is high. Then,
as the task is repeated, the employee learns how
to complete it quickly, and that reduces the amount of time
needed for a unit of output.
UNDERSTANDING LEARNING
CURVES
That is why the learning curve is downward sloping in
the beginning with a flat slope toward the end, with the cost
per unit depicted on the Y-axis and total output on the X-axis.
As learning increases, it decreases the cost per unit of output
initially before flattening out, as it becomes harder to
increase the efficiencies gained through learning.
REQUIREMENTS FOR LEARNING
CURVE MODELS
To develop an accurate learning curve model, you need to
make sure you have all the variables that go into the formula.
The data required to plot a learning curve and then interpret
what it means for your company's performance includes the
following:
• A measurable unit of output
• A defined unit of cost (in time, dollars, effort, etc.)
• Either a fixed time frame or a fixed productivity target
BENEFITS OF USING THE LEARNING
CURVE
• The learning curve does a good job of depicting the cost per
unit of output over time.
• The slope of the learning curve represents the rate in which
learning translates into cost savings for a company. The steeper
the slope, the higher the cost savings per unit of output. This
standard learning curve is known as the 80% learning curve. It
shows that for every doubling of a company's output, the cost of
the new output is 80% of the prior output. As output increases, it
becomes harder and harder to double a company's previous
output, depicted using the slope of the curve, which means cost
savings slow over time.
ADVANTAGES OF THE LEARNING
CURVE MODEL
Using a learning curve model to track the progress of various
aspects of your company can help you in the following tasks:
• Strategic planning to improve the output of employees or
even whole departments
• Motivating company staff by creating a culture of ongoing
learning and progress-tracking
• Identifying trends that can be used for more accurate
forecasting and better business decisions
DISADVANTAGES OF THE
LEARNING CURVE MODEL
As valuable as it can be to a company, there are some
important limitations to understand so the learning curve isn't
misinterpreted or misused. Here are some of the key
disadvantages and limitations:
• Learning progress is influenced by a number of variables,
including time, previous experience, quality of training and
so on. As a result, tracking only one of these variables might
give you misleading data.
DISADVANTAGES OF THE
LEARNING CURVE MODEL
• Some performance or progress is difficult to quantify and
measure. If there is no specific deliverable, such as a
product or a sale, it can be hard to define a single unit of
output for the purpose of measuring progress.
• It's incomplete on its own. Because there are so many
variables that can impact performance, it's important that
you use the learning curve model in combination with other
methods of tracking company performance for a more
complete picture.
HOW TO USE THE LEARNING CURVE
THEORY TO IMPROVE PERFORMANCE
1. Establish clear and precise terms.
2. Measure multiple variables at the same time.
3. Double-check your data.
4. Make informed decisions.
5. Continue monitoring.
LEARNING CURVE FORMULA
Y = AX * B
Y = average time per unit of output
A = time it took to complete the task the first time
X = total number of attempts or units of output
B = slope of the function
HOW TO USE THE LEARNING
CURVE FORMULA
Simply put, the equation helps you understand the average
cost, usually in time, of reaching maximum efficiency. The
more attempts that are included in the formula, the lower the
average time will be.
To use this formula, you'll need to track the time and output
data for whatever you're trying to measure. Follow these
steps to do so:
1. Define your unit of output.
2. Define your cost.
HOW TO USE THE LEARNING
CURVE FORMULA
3. Establish your time frame.
4. Establish your target.
5. Begin measuring.
6. Keep your data organized.
FOUR EXAMPLES OF THE LEARNING
CURVE MODEL
• The diminishing returns learning curve
• The increasing returns learning curve
• The S-curve
• The complex learning curve
THE DIMINISHING RETURNS
LEARNING CURVE
This shape, which looks like a steep, downward slope quickly
followed by a plateau or straight line, means that learning time is
relatively fast and you are quickly achieving maximum efficiency.
In terms of decision making, this result means that this aspect of
the company is performing well but that you need to make sure
you are keeping costs down after the plateau begins.
Another thing to look for here is where the plateau happens.
The lower down the plateau occurs (toward the X-axis), the more
efficient the performance is. If the plateau begins in the upper half
of the graph, this indicates that the task you're measuring has a
consistently high cost and you might want to look for ways to
lower that cost.
THE INCREASING RETURNS
LEARNING CURVE
The slope in this type of learning curve will be shallow at
first, followed by a steep drop off. This suggests that the task
takes a long time to learn, but once learned, employees can
quickly reach a point of high efficiency.
In terms of decision-making, you may not need to do
anything here, as the initial cost of slow learning is quickly
returned once the high-efficiency phase is reached.
However, if the rest of the data suggests this task shouldn't
take very long to learn, this shape could indicate your
company may need to modify its training method.
THE S-CURVE
The S-shape of this learning curve suggests that learning
is slow at first, followed by a steep drop in cost per unit of
output. Then, after the steep drop, there is a plateau effect.
Like the diminishing returns learning curve, if this plateau
is happening close to the X-axis, this represents a highly
efficient performance. If, however, the plateau is happening
in the top half of the graph, performance may not be as
efficient as it could be. In this case, there is cause to take a
closer look both at the training method and at any variables
that could be impacting the cost of ongoing performance in
the plateau phase.
THE COMPLEX LEARNING CURVE
A complex learning curve is one that you will most often
see for the more difficult tasks in your company. It begins with
a shallow learning curve, followed by a plateau, followed by
a drop off that might be steep or shallow.
This suggests that the task being measured is difficult to
learn, and even after learning, it takes a certain amount of
practice before an employee can really perform the task
efficiently. For decision-making, a company might look for
ways to improve training, or it might choose to reduce costs
by hiring candidates who already have the experience
required to reach peak efficiency for this task.
MODELS
1. Wright Model or Cumulative average time learning model
• Used when having mass production, when making identical
units, and the relevant information required for
management is total average reduction in the time of all
the units or in a batch
• Learning increase with a fixed percentage every time when
production becomes double
• Described by T. P. Wright in 1936 in his work “Factors
Affecting the Cost of Airplanes”, after realizing that the cost
of aircraft production decreased with the increase in
production performance
MODELS
Formula:
Total time = Initial time x ( 2 x LC) x ( 2 x LC) x ( 2 x LC) …
Example:
Supposed the first 20 units takes 20 hours to be produced. The
learning rate is 90%.
MODELS
Solution:
40 units = 20 x (2 x 90%) = 36 hours
If the first 20 units have already taken 20 hours and 40
units are supposed to take 36 hours, this means that the next
20 units are taking 16 hours.
Total time taken by all units – Time taken by previous unit
2nd lot of 20 units took (36 – 20) = 16 / 20 = 0.8 hour per unit
MODELS
80 units = 20 (2 x 90%) ^ 2 = 64.8 hours
160 units = 20 (2 x 90%) ^ 3 = 116.64 hours
320 units = 20 (2 x 90%) ^ 4 = 209.95 hours
EXAMPLE
Aerosub Inc. has developed a new product for spacecraft that
includes the manufacturing of a complex part. The
manufacturing of this part requires a high degree of technical
skill. Management believes there is a good opportunity for its
technical force to learn and improve as they become
accustomed to the production process. The production of the
first unit requires 10,000 direct labor hours. If an 80% learning
curve is used and eight units are produced, the cumulative
average direct labor hours required per unit of the product will
be? Find out how much cumulatively they will required the total
hours.
EXAMPLE
a. 5,120 hours
b. 6,400 hours
c. 8,000 hours
d. 10,000 hours
ANSWER
Unit 1 = 10,000 hours
Unit 2 = 16,000 hours (10,000 x (2 x .80)
Unit 4 = 25,600 hours (10,000 x (2 x .80) x (2 x .80))
Unit 8 = 40,960 hours (10,000 x (2 x .80) x (2 x .80) x (2 x .80))
Cumulative direct labor hours = 40,960 hours / 8 units = 5,120
hours per unit
MODELS
2. Crawford Model or Incremental unit time learning model
• Suitable when we are required to have information about
every next unit would take how much time and usually
suitable for a job order
• Every incremental unit takes less time at a fixed percentage
due to the effect of learning curve
Assumption: Time declines by a constant percentage each
time the cumulative quantity doubles (i.e. 1st, 2nd, 4th, 8th,
16th… unit)
MODELS
Formula:
Total time = Initial time x LC x LC x LC…
Example:
Suppose the first unit takes 20 hours to be produced. The
learning rate is 90%.
MODELS
Solution:
2nd unit = 20 x .9 = 18 hours
4th unit = 18 x .9 = 16.2 hours
8th unit = 14.58 x .9 = 14.58 hours
16th unit = 13.12 x .9 = 13.122 hours
EXAMPLE
Propeller Inc. plans to manufacture a newly designed high-
technology propeller for airplanes. Propeller forecasts that as
workers gain experience, they will need less time to complete
the job. Based on prior experience, Propeller estimates a 70%
cumulative learning curve and has projected
the following costs.
Cumulative number of Manufacturing Projections Total costs
units produced Average cost per unit
1 20,000 20,000
2 14,000 28,000
EXAMPLE
If Propeller manufactures eight propellers, the total
manufacturing cost would be
a. 50,660
b. 54,880
c. 62,643
d. 112,000
ANSWER
We know the time required for first unit and second unit, we
will now be looking for the 4th and 8th unit, so the time
required for second unit multiplied by .70 is the 4th unit.
Unit 4 = 9,800 cost (14,000 x .70)
Unit 8 = 6,860 cost (9,800 x .70)
Total cost = 8 units x 6,860 per unit = 54,880
SUMMARY
• Learning curve based on the simple idea that the time
required to perform a task decreases as a worker gains
experience. The basic concept is that the time, or cost, of
performing a task (e.g., producing a unit of output)
decreases at a constant rate as cumulative output doubles.
Learning curves are useful for preparing cost estimates,
bidding on special orders, setting labor standards,
scheduling labor requirements, evaluating labor
performance, and setting incentive wage rates.
