Cost Drivers Learning Event, 2nd November 2005

Learning Curves Some Alternative Approaches

Alan R Jones, BAE Systems

O! This Learning, what a thing it is.

William Shakespeare (c.1594, The Taming of The Shrew)

The material presented here is based on a case study presented in the following publication: Jones, A.R. Case Study - Applying Learning Curves in Aircraft Production - Procedures and Experiences in Zandin, K (editor) Maynards Industrial Engineering Handbook, 5th Edition, McGraw-Hill, New York, 2001 2005 BAE Systems

Cost Drivers Learning Event, 2nd November 2005

Learning Curves An Alternative Approach

Constituent Elements of Production Learning

Segmentation Theory

Applications
Effect of Output Rate Constraint End of Line Effect Assessing Loss of Learning Multi-Ganging of Operations (Parallel Learning)

Cumulative and Cumulative Average Data

Formulae Examples
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Cost Drivers Learning Event, 2nd November 2005

Background

Constituent Elements of Production Learning

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Cost Drivers Learning Event, 2nd November 2005

Constituent Elements of Production Learning

Tooling Improvements 34% Manufacturing Cost Improvements Quality Control 4% 6% 22% 11% Manufacturing Control Operator Learning Engineering Changes to Assist Production

23%

Source: P Jefferson, Productivity Comparisons with the USA where do we differ? Aeronautical Journal, Vol 85 No844 May 1981, p.179 2005 BAE Systems

Cost Drivers Learning Event, 2nd November 2005

Segmenting the Learning Curve: Mathematical Model

Consider 4 cost driver components with values , , , and where + + + = 1 (or 100%) Equation of a Unit Learning Curve: TA = T1 A where is the learning exponent: = log(p)/log(2) with p = the learning percentage expressed as a decimal and TA is the time at Unit A Expand the exponent: TA = T1 A( + + + ) TA = T1 A A A A In order to model data with breakpoints, re-define the variable A: TA = T1 A1 A2 A3 A4
For the primary learning (where all cost drivers are active), the values of A1 A2 A3 and A4 are all equal
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Cost Drivers Learning Event, 2nd November 2005

Segmenting the Learning Curve: Mathematical Model

Example based on a production run of 60 units points Relative learning Build No A 1 2 3 4 5
Impact of design freeze truncates relative learning for this cost driver
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All cost drivers active. are all equal

Design A1 1 2 3 4 5 5 5 5

Operator A2 1 2 3 4 5 10 10 10

Tooling A3 1 2 3 4 5 10 45 45

Logistics A4 1 2 3 4 5 10 45 45
Impact of constant output rate truncates relative learning for this cost driver End of Line truncates relative learning for these cost drivers

10 45 60

Cost Drivers Learning Event, 2nd November 2005

Learning Curve Segmentation: Points to Consider

Benefits of Approach: Allows discontinuities to be modelled easily (using an on/off switch approach) Allows scenarios to be modelled which assume learning rates greater than or less than the norm for a particular process or product type Allows multiple linear regression techniques to be applied in cost data analysis

Words of Caution: As with all modelling techniques, the approach requires calibration for the specific environment in which it is to be applied There should be a logical model or explanation of why particular cost drivers have been switched in or out

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Cost Drivers Learning Event, 2nd November 2005

Application Example

Effect of Output Rate Constraint on Learning

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Cost Drivers Learning Event, 2nd November 2005

Effect of Output Rate Constraint on Learning

Average Contents

Number of Operators

Average Hours Worked in Time Period

Average Hours spent per Unit in Time Period

Number of Units produced in Time Period

Constant
(For Optimum Learning)

Constant
(Effective Upper & Lower Limits)

(Learning Curve)

Reducing

Increasing
(Rate Ramp-up)

Every operator performs same task on every unit

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Constrained by working hour practices (basic working week & sustainable overtime

The Reduced Cost : Increased Output is in part a natural response of increased product familiarity, and in part a response to market expectations of affordability etc

Cost Drivers Learning Event, 2nd November 2005

Effect of Output Rate Constraint on Learning

Average Contents

Number of Operators

Average Hours Worked in Time Period

Average Hours spent per Unit in Time Period

Number of Units produced in Time Period

Reducing

Constant
(Effective Upper & Lower Limits)

(Learning Curve)

Reducing

(Fixed Output Rate)

Constant

Reducing the number of operators violates the premise for optimum learning
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Constrained by working hour practices (basic working week & sustainable overtime

A response to market expectations of affordability etc to drive down costs

Customer contractual limitation or constraint

Cost Drivers Learning Event, 2nd November 2005

Example 1: Cumulative Deliveries of Product A

350

Delivery Rate Build-up

Constant Rate Deliveries

300

250

Cumulative Units

200
9.75 per month

150
117

100

50

Years
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Cost Drivers Learning Event, 2nd November 2005

Example 2: Assembly Learning for Product A

Delivery Rate Build-up Constant Rate Deliveries

80.4% Learning after the breakpoint

Man-hours

75.7% Learning up to the breakpoint Swingometer

22%

Breakpoint @ 117

78%

10

Cumulative Units
5% Confidence Level

100

1000

Actual
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Regression

95% Confidence Level

Cost Drivers Learning Event, 2nd November 2005

Example 2: Cumulative Deliveries of Product B

250

Delivery Rate Build-up

Constant Rate Deliveries

200

Cumulative Units

150

4 per month

100

60

50

Years
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Cost Drivers Learning Event, 2nd November 2005

Example 2: Assembly Learning for Product B

Delivery Rate Build-up Constant Rate Deliveries

Man-hours

87.8% Learning after the breakpoint 72.1% Learning up to the breakpoint Swingometer

40%

Breakpoint @ 60

60%

10

Cumulative Units
5% Confidence Level

100

1000

Actual
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Regression

95% Confidence Level

Cost Drivers Learning Event, 2nd November 2005

Effect of Output Rate Constraint on Learning

Other factors affecting the analysis: The examples emanate from different factories with different management styles and cultural heritage One product was essentially for a single customer variant/mark initially followed by small batch export orders The other product was a multiple variant/mark international collaboration The level of continued investment was geared around the known and perceived market opportunities The level and timing of engineering change required to introduce export variants and support customer modifications has to be considered The underlying manufacturing technology used on the two products was similar but not identical

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Cost Drivers Learning Event, 2nd November 2005

Application Example

End of Line Effect on Learning Curves

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Cost Drivers Learning Event, 2nd November 2005

End of Line Effect on Learning Curves Premise:

To enable ongoing learning curve reduction once a constant rate of output is achieved requires investment in new or improved technology, process or logistics etc
Reduced quantity remaining over which investment can be recovered
100 90 80 70 60 50 40 30 1 2 3 4 5 6 7 8 9 10 11 12

Cumulative Return on Investment

Reduced saving per unit

Diminishing Return on Investment

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Cost Drivers Learning Event, 2nd November 2005

End of Line Effect on Learning Curves

1000
Learning Rate 75% 80% 85% 90%

Factor (Cumulative Return on Investment)

100

Diminishing Cumulative Return on Investment = (Unit Learning Curve Reduction) x (Units Remaining)

10
75% 80% 85% 90%

Quantity

0.1

0.01
Quantity

It would seem that there is a case that a learning curve will truncate naturally somewhere between the 60% to 80% point of the total envisaged production quantity, regardless of the learning curve rate?

0.001 1
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10

Cumulative Units

100

1000

Cost Drivers Learning Event, 2nd November 2005

End of Line Effect on Learning Curves

100000

Factor (Cumulative Return on Investment)

The empirical relationship of the End of Line Effect on a learning curve can be attributed to the Law of Diminishing Returns. It is not unreasonable to expect that a learning curve will truncate naturally somewhere between the 60% to 80% point of the total envisaged production quantity.
10000

Quantity

Example: Constant rate of output at unit 50 400 units planned in total 75% Learning Curve
1000 1 10

Breakpoint @ Constant Rate

Cumulative Units

100

1000

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Cost Drivers Learning Event, 2nd November 2005

Application Example

Assessing Loss of Learning

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Cost Drivers Learning Event, 2nd November 2005

Assessing Loss of Learning: Anderlohr Method

Consider a Break in Production of 12 months after 50 units
3.
Man-hours

4.

This defines the re-start position for learning Repeat the learning process (offset by the number of units lost)

1. 2.

Determine how many units have been produced in the previous 12 months Back track up the learning curve by this quantity

10

Cumulative Units

100

1000

Source: Anderlohr, G., What production breaks cost, Journal of Industrial Engineering, September 1969, pp.34-36 2005 BAE Systems

Basic

Anderlohr

Cost Drivers Learning Event, 2nd November 2005

Assessing Loss of Learning: Segmentation Method

Consider a Break in Production of 12 months after 50 units
3.
69%

Continued Component of Learning

Man-hours

ple am Ex
31%

4.

Component subject to Re-Learning

After the break the continued learning component still applies Factor this by the re-learning component (offset by the number of units lost)

1. 2.
1

Determine the proportion of learning that will continue by considering the cost drivers that might be affected This defines the re-start position for learning after the break
10

Cumulative Units
With Re-learning

100

1000

Basic
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Continued Learning

Cost Drivers Learning Event, 2nd November 2005

Assessing Loss of Learning: Comparison of Methods

Consider a Break in Production of 12 months after 50 units

Man-hours

Anderlohr Method

Anderlohr method always lags the segmentation method for the same re-start value
Cumulative Units
Anderlohr

Segmentation Method

10

100

1000

Basic
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Segmentation

Cost Drivers Learning Event, 2nd November 2005

Assessing Loss of Learning: Comparison of Methods

Practical Considerations: Small breaks in production will be more difficult to detect further down the curve due to potential noise in the actual data The Anderlohr Method assumes that the rate of learning loss is equivalent to the rate of learning gain. This is not necessarily the case, but a modified approach which backtracks only a proportion of the lost learning could be adopted What happens when the break in production occurs during the latter stages of the production run (often the case)? The learning curve may have bottomed out by this stage Either approach could be applied to other cases of learning loss other than time breaks; for example, a physical relocation or new start-up.

Consider the following example using the cost driver segmentation method
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Cost Drivers Learning Event, 2nd November 2005

Example 3: Cumulative Deliveries of Product C

1000 980 960 940
2 per month @ peak

3-Year Break In Production

Cumulative Units

2 per month @ end of line

920 900 880 860 840 820 800

Years
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Cost Drivers Learning Event, 2nd November 2005

Example 3: Assembly Learning for Product C

Rate restricted learning

Re-learning

Man-hours

Swingometer
22%

Swingometer

29% 71%

78%

Break in Production

700

750

800

Cumulative Units
Actual Regression

850

900

950

1000

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Cost Drivers Learning Event, 2nd November 2005

Application Example

Multi-Ganging of Operations: Parallel Learning

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Cost Drivers Learning Event, 2nd November 2005

Multi-Ganging of Operations: Parallel Learning

Multi-Gang parallel working has the effect of deferring learning curve reduction by a proportion of the lost operator contribution
Man-hours

This has the apparent effect of reducing the observed learning and increasing the theoretical First Unit Value
1 Common Learning
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Cumulative Units
Series Working 2-Gangs 4-Gangs

10

100 8-Gangs

Cost Drivers Learning Event, 2nd November 2005

Alternative Approaches

Cumulative and Cumulative Average Data

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Cost Drivers Learning Event, 2nd November 2005

Cumulative Average Data

Cumulative Average Model: The formula for the Cumulative Average version of a Learning Curve is the same as that for a Unit Learning Curve: TA = T1 A
where is the learning exponent: = log(p)/log(2) with p = the learning percentage expressed as a decimal and TA is the Cumulative Average Time at Unit A

The Cumulative Average version will be inherently smoother than its Unit counterpart, but the rate of learning indicated will be very similar for higher quantities (greater than 30 depending on the accuracy required)

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Cost Drivers Learning Event, 2nd November 2005

Cumulative Average Data

Man-hours

Cumulative Average Curve runs parallel to the Unit Curve for larger quantities

10

Cumulative Units
Unit Cum Ave

100

1000

Unit
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Unit Regression

Cost Drivers Learning Event, 2nd November 2005

Cumulative Data Approximation Formulae

Cumulative Data Approximations for a Unit Learning Curve: For a positive error1, CA ~ T1 [ (A + 0.5)+1 - 0.5+1 ] ( + 1) For a negative error2, CA ~ T1 (A+1 - 1) + T1 (A + 1) ( + 1) 2

where is the learning exponent: = log(p)/log(2) with p = the learning percentage expressed as a decimal
Source: 1. Conway, R.W. and Schultz, A.Jr., The Manufacturing Progress Function, Journal of Industrial Engineering, Jan-Feb 1959, pp.39-54 2. Jones, A.R. Case Study - Applying Learning Curves in Aircraft Production - Procedures and Experiences in Zandin, K (editor) Maynards Industrial Engineering Handbook, 5th Edition, McGraw-Hill, New York, 2001 2005 BAE Systems

Cost Drivers Learning Event, 2nd November 2005

Cumulative Data Approximation Formulae Error

2.50% 2.00% 1.50% 1.00%

80% learning curve

Cauchy-Schwartz Approximation

% Error

0.50% 0.00% -0.50% -1.00% -1.50% -2.00% -2.50% 0 10 20 30 40 50 60 70 80 90 100

75% learning curve

Jones Approximation

Cumulative Units

Source: Jones, A.R. Case Study - Applying Learning Curves in Aircraft Production - Procedures and Experiences in Zandin, K (editor) Maynards Industrial Engineering Handbook, 5th Edition, McGraw-Hill, New York, 2001 2005 BAE Systems

Cost Drivers Learning Event, 2nd November 2005

Cumulative Data Equivalent Unit Completion Method

60

C m la iv U it u u t e n s

50 40 30 20 10 0

Calendar Time

Cumulative Average Cumulative Average based on Equivalent Unit Completions Unit Learning Curve

Man-hours

0.1

Cumulative Units

10

100

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