Post on 06-Apr-2015
LaChawn SmithBUS 624Final Project
Experience Curves
Concept Discussion: Experience Curves
Experience models have been developed on the basic premise that over
time as individuals and organizations get better at doing something. The cost of
doing that something decreases as the production of that something increases.
“By gaining experience through repetition, organizations and individuals develop
relatively permanent changes in behavior or learning” (Experience and Learning
Curves). Costs of the value added activities, net of inflation, will decline 25 to 30
percent each time the total accumulated experience has been doubled”
(Experience Curve). Figure 1 represents an Experience Curve.
Experience curves were first described
in 1960 by Bruce Henderson and were
used to examine the relationship
between the production costs and the
production quantity. Experience curves
look at a broad range of elements
including marketing strategies and costs, administration, cost of distribution and
the costs associated with manufacturing including raw materials.
Experience and learning curve models are often used interchangeably.
They however are slightly different. Experience curves are analytical tools
designed to quantify the rate at which experience of accumulated output affects
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Figure 1 Experience Curve
LaChawn SmithBUS 624Final Projecttotal lifetime costs and can be used to predict future costs in the market. Learning
tools are also analytical tools but are designed to quantify the rate at which
cumulative experience of labor hors or costs allows an organization to reduce the
amount of resources needed for a task (Experience and Learning Curves). Steep
Experience Curves exist most often in environments where there are high labor
inputs. Computers can not be taught new skills and typically operate at the same
levels of productivity. Mass production of similar items or services is also
necessary as well as long production cycles. Lack of radical product innovation
allows for the right environment for steep experience curves. Once innovation
occurs the Experience Curve is reduced and the industry has to begin again.
Also steep Experience Curves can exist when there is a transfer of experience in
an organization or company from one department or process to another
(personal communication, Galbraith, 2010).
Experience Curves helps organizations to understand future markets and
prices inside and outside of their organization. They also help to manage costs
and indicate to companies when it is time to reduce price or look for new
innovations. It also helps to manage competition. If there are companies that are
operating with significantly higher Experience Curves then others then this
indicates to those other companies either where they need to exit or enter the
market in order to make a profit (personal communication, Galbraith, 2010).
Interpretation
Relation to Education
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LaChawn SmithBUS 624Final Project
Educators often find themselves beginning new programs and evaluating
whether to discontinue or continue others. Examining the experience curves that
exist within schools and school systems as they relate to production of a desired
outcome ie.. student learning is very relevant. Educators could use this strategy
to evaluate whether the inputs outweigh the outputs when examining program
effectiveness. This might also help school systems to evaluate whether or not
certain services needed to be outsourced to organizations that had greater
learning curves in the area they are evaluating. Schools rarely evaluate outputs
or process in terms of learning or experience curves but in a declining and more
challenging economy it might be prudent for schools and school systems to
consider doing so in the near future.
Artwork
My art work depicts an Experience Curve that could be found in any
manufacturing environment. Initial production began with large circles with poorly
defined edges that indicate that processes had not been defined and that
because this was a new product productivity was down and costs were up. With
a doubling of production, the circles become more defined and with and
Experience Curve of 70% there is a decrease in costs of 30%. The circles are
much better defined, there is
greater detail, and greater
number and fewer resources
were needed. The circles are
formed tightly together and
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LaChawn SmithBUS 624Final Projectlittle opportunity for others to enter the market unless they present a new
innovation or can enter the market with the same Experience Curve being
presented. With the current Experience Curve, future costs, expenditure and
production rates can be predicted and costs can be managed. The larger circles
at the bottom of the art work represent a company trying to enter the market with
a similar product but without the experience of other companies in the existing
market and that they are unable to be completely on the canvas symbolizes that
because of their lack of experience and costs they are unsuccessful in their
attempt.
Evaluation of Project
I believe that I conducted far more research on the topic then if I had
completed the traditional assignment. I found myself researching and consulting
with others about different mediums in art and how they would work in conveying
the desired meaning of the topic. I read and re-read several sources in an
attempt to better understand my topic in such a way that I could depict it in a
physical sense and present its meaning and interpretation verbally. It is much
more difficult to convey the meaning of a complex topic without words than with
them. I definitely am able to relate to the “big picture” effect with this assignment.
I also consulted with several individuals including my art teacher about the
project and found that as I explained the concept over and over, I began to better
understand it and was able to convey a clearer picture to my audience each time.
I also found that because I was engaged and motivated by the task that I wanted
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LaChawn SmithBUS 624Final Projectto share it with others. There are quite a few people who now know more about
learning and experience curves then they ever realized that they would.
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LaChawn SmithBUS 624Final Project
References
The Experience Curve. Retrieved November 27, 2010 from www.netnba.
com/strategy/experience-curve.
Experience and Learning Curves. Retrieved November 27, 2010 from
www.reference for business.com/management
Experience Curve. Retrieved November 27, 2010 from www.sayeconomy.com/
experience-curve/.
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