Chapter 18

Productivity and Learning Curves

What is Productivity?

Different types of productivity:

Capital: # products produced ÷ asset value

Materials: # prods. produced ÷ $ spent on mat’ls

Direct labor: # prods. produced ÷ direct labor-hrs

Overhead: # prods. produced ÷ $ spent on overhd

It’s usually possible to increase one type by decreasing another type.

used resources of Amount

produced services or products ofQuantity tyProductivi

Labor Productivity

Labor productivity has traditionally be the type of productivity measure most focused on.

However, with improvements in technology and automation, it is less important for many companies today.

Some state-of-the-art factories using CIM have no direct labor employees (a lights-out factory), so direct labor productivity is completely irrelevant at those factories.

Management should track all types of productivity.

Labor Productivity

Designing Workers’ Jobs

What are the criticisms of assembly line work?Job design approaches:• Cross-training—train for multiple positions• Job enlargement—add additional similar tasks• Job enrichment—add different types of tasks,

such as inspection, testing, planning, etc.• Team production—team is responsible for work;

some self-managementWhat is the perspective of labor unions about this?What is worker empowerment?

Learning Curves

Principle: The more times a person performs a task, the quicker they get at it.

Studies have shown that this learning generally takes place at a predictable rate the learning rate (LR)

For example, in the aircraft industry it has been shown that the typical learning rate for aircraft manufacturing tasks is around 80%.

Learning Curves

Every time you double the number of units produced, the time required per unit decreases by a fixed percentage.

A 70% learning rate means that if the 8th unit took 100 hours to produce, then the 16th unit would take 70 hours to produce.

3 ways to use learning curves:• double the number of units• learning curve formula• learning curve table

Double the Number of Units

nth unit labor hrs. 80% learning rate

1 100

2

4

8

16

32

Learning Curve Formula

Tn = T1(nb) where b = (log LR) / (log 2) or b = (ln LR) / (ln 2)

For example,

If T1=65 with LR=75%, LR b 70% = .70 -0.515 75% = .75 -0.415 80% = .80 -0.322 85% = .85 -0.234 90% = .90 -0.152

Learning Curve Table

Table 18.12, page 724Suppose it takes 43 hours to produce 1st unit.How long should it take to produce 12th unit using

a 75% learning rate?

How long should it take to produce units 1-10?

Learning Curve Example

It takes 120 labor hours to produce the 1st unit of a new product (the prototype). The company expects an 85% learning rate. How long should it take to produce the 8th unit using:

a.) double the number of units

b.) learning curve formula

c.) learning curve table

LR = 0.85 T1 = 120 n = 8

Learning Curve Example

a.)

nth unit labor hrs. 85% learning rate

1 120

2

4

8

16

Learning Curve Example

b.) Tn = T1(nb) b = (ln LR) / (ln 2)

Learning Curve Example

c.)

T8 = T1(factor) =

T9 = T1(factor) =

T1-8 = T1(factor) =

Learning Curve Example

Suppose the labor cost rate is $17.00 per hour and company policy is to charge a customer 3 times the labor cost for a job. What should the price be for the first 8 units?

from table: T1-8 = 120(5.936) = 712.32 hours

so

Price =

Learning Curve Example

Suppose the company just finished the 1st 8 units and the customer wants to know how much they would be charged per unit for an additional 5 units?

T1-8 = 712.32 T1-13 =