What Is a Learning Curve?
Let me explain to you what a learning curve is. It's a graphical representation of how a process gets better through learning and gaining proficiency. You'll see that tasks take less time and fewer resources the more you perform them. This concept was first described by psychologist Hermann Ebbinghaus in 1885, and it's used to measure production efficiency and forecast costs.
Key Takeaways
The learning curve graphs the time it takes to acquire new skills or knowledge. In business, the slope of this curve shows the rate at which learning new skills leads to cost savings for the company. Typically, a learning curve includes a percentage that identifies the rate of improvement.
Role in Business
In business, you can calculate the cost of producing a single unit based on the hours needed and an employee's hourly rate. As you repeat a task, the employee learns to complete it faster, reducing the time per unit. A well-placed employee should lower the company's costs over time. You can use the learning curve for production planning, cost forecasting, and logistics schedules.
We also call it the experience curve, cost curve, efficiency curve, or productivity curve because it measures cost benefits. The curve slopes downward at first, then flattens out. As learning increases, it cuts the cost per unit initially, but it gets harder to gain more efficiencies, so the curve levels off.
Learning curves often come with percentages showing the improvement rate. For instance, a 90% learning curve means that every time you double the cumulative quantity, there's a 10% efficiency gain in the average production time per unit. The percentage indicates how much time carries over to future tasks when production doubles.
Learning Curve Formula
Here's the formula for the learning curve to find the target cumulative average time per unit or batch: Y = a * X^b, where Y is the cumulative average time per unit or batch, a is the time taken to produce the initial quantity, X is the cumulative units of production or batches, and b is the slope or learning curve index, calculated as the log of the learning curve percentage divided by the log of 2.
Example
Assume an 80% learning curve, meaning the process gets 20% more efficient every time the cumulative quantity doubles. Say the first task takes 1,000 hours. For one task, Y = 1000 * 1^(log 0.80 / log 2) = 1000 hours average per task.
Now double the output to two tasks. Y = 1000 * 2^(log 0.80 / log 2) = 800 hours average per task, so total time for two is 1,600 hours, meaning the second task took 600 hours incrementally.
Double again to four tasks: Y = 1000 * 4^(log 0.80 / log 2) = 640 hours average per task, total 2,560 hours, so the third and fourth tasks together took 960 hours incrementally. This pattern continues, showing diminishing averages.
Learning Curve Table
- Cumulative Quantity: 1, Cumulative Production Time: 1,000 hours, Cumulative Average Time Per Unit: 1,000 hours, Incremental Time: 1,000 hours
- Cumulative Quantity: 2, Cumulative Production Time: 1,600 hours, Cumulative Average Time Per Unit: 800 hours, Incremental Time: 600 hours
- Cumulative Quantity: 4, Cumulative Production Time: 2,560 hours, Cumulative Average Time Per Unit: 640 hours, Incremental Time: 960 hours
Graphing Data
You can graph learning curve data to see trend lines clearly. One option is plotting the total cumulative time needed for a given number of tasks, which shows more time for more tasks but actually reflects increasing efficiency since the x-axis doubles.
Another graph might show the average time per task, which slopes downward, better illustrating how efficiency improves over repetitions.
How Can a Manufacturer Use Learning Curve Information?
The learning curve helps you understand production costs and cost per unit. For a new hire on a manufacturing line, they'll produce more goods faster as they get proficient. With a 90% curve, there's 10% improvement per doubling of repetitions. Use this to forecast finances, price goods, and meet demand.
What Does a High Learning Curve Mean?
A high or steep learning curve means the initial task requires substantial resources, but subsequent performances take less time because it's easier to learn. It tells you that while training might be intensive, proficiency comes quickly.
What Does a 90% Learning Curve Mean?
A 90% learning curve indicates a 10% improvement rate every time repetitions double, meaning it takes 90% of the previous time to perform double the tasks.
The Bottom Line
The first time you perform a task, it likely takes more time and resources than the 100th time. This continual improvement is what the learning curve measures.
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