Learning Curve Analysis Exercise: purchasing and sourcing course

Craig Phillips is a buyer at Socon, a manufacturer of large industrial pumps. He has a requirement for a customized subassembly that his preferred supplier, Oriel, is building for the first time. He is preparing for negotiation with Oriel, where a key issue will be the price of a subassembly. Given the unique nature of this subassembly, Craig expects to incorporate into the contract price reduction targets based on learning curve estimates.

While Craig does not have specific data for Oriel, he has accumulated data for a subassembly that was similar in design and manufacturing complexity.

Units   Total Labour Hours   Average Labour per unit Learning Rate  

1 6 **********

2 10.8      

4 19.2      

8 35.2      

16 64      

32 115.2      

64 211.2      

128 384      

Overall average improvement rate:      

Applicable learning curve:      

Assignment:

1. Given the above data, calculate the average labour per unit given the cumulative total hours provided.

2. Calculate the appropriate learning rate and the overall average improvement rate for this data set.

3. Are gains from learning realized early in production or at a later point?

4. A learning curve applies to improvements in the direct labour portion of a process. How does the learning curve differ from the experience curve?