Page 177 - DMGT206_PRODUCTION_AND_OPERATIONS_MANAGEMENT

Production and Operations Management

Notes The table shows that the learning curve is exponential. It also shows a difference in the reduction
in time between Piper Aircraft Corporation and HAL. The reduction in time at HAL between the
4th unit and the 20th unit is nearly 7900 direct hours and in the case of Piper, it is 1700 hours.
The reason for this difference is that Piper already had programs where it was supplying CKD
packs to Columbia, Brazil, Argentina, Poland and Chile. Therefore, Piper starts learning from a
different point on the learning curve than would HAL, for whom the product is completely new.
The learning curve will vary on different programs. A table of percentages for each type of
program can be developed by taking the ratio of the average hours for the total program to the
average hours for the first half of the total units.

Example: The average hours for 200 units are 80 hours, and the average hours for the first
100 units were 100 hours each. Thus, 80/100 equals 80 per cent. This is an 80 per cent curve.

Various curves are classified as 80 per cent, 86 per cent, 90 per cent, etc., curves. If an 80 per cent
curve were plotted on arithmetic paper, we would expect a different-shaped curve for each
project. If it is plotted on log-log paper, all curves will be straight lines. Tables for the various
percentage curves can be developed and so accurate figures can be calculated without using the
more complicated mathematical formulas.

Self Assessment

Fill in the blanks:
13. A learning curve is a line displaying the relationship between unit production time and
……………… of units produced.
14. The ……………… model is expressed in terms of the specific cost of producing the ‘x’th
unit.

15. The log-linear model states that the improvement in productivity is ……………… as
output increases.

8.6 Summary

 ‘Supply Chain Management’ is defined as the integration-oriented skills required for
providing competitive advantage to the organization that are basis for successful supply
chains.

 The objective of every supply chain is to maximize the overall value generated so that the
final price of the good covers all of the costs involved plus a profit for each participant in
the chain.
 Purchases represent about 55 percent of the cost of the finished product and purchasing is
a major constituent of the supply chain.

 A make or buy decision should be viewed as an investment decision and should take into
account considerations other than the economic factors like Technology, Quality, and
Timely Delivery.
 Value Engineering is an organized creative technique directed at analyzing the functions
of a product, service or system with the purpose of achieving the required functions at the
lowest overall cost.
 Value Engineering starts with the classification and identification of a product, service or
system.

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