Jenny Wilson is a buyer at Flextron, a manufacturer of large industrial pumps. She has a requirement for a customized subassembly that a preferred supplier, Vistral, is building for the first time. She is preparing for negotiation with Vistral, where a key issue will be the price of the subassembly. Given the unique nature of this subassembly, Jenny expects to incorporate into the contract price reduction targets based on learning curve estimates. While Jenny does not have specific data for Vistral, she has accumulated data for a subassembly that was similar in design and manufacturing complexity.

As you work through this assignment keep the following in mind:

-You have the answers to question 1 and and you have everything you need to calculate the overall average learning rate for question 2.

-To find the overall average improvement rate you just need to calculating the average of everything in the question 2 learning rate column. You calculate the average by adding up all of the numbers in the learning rate column and divide it by 7, which is the number times the production rate doubled.

- To find the learning curve subtract your average improvement rate from 100 and you get your learning curve. As it shows in the book it is an indicator of the overall labor deduction expected if we double production. That is all we are trying to figure out. It helps you plan production and do a check to see if you are getting the most productivity when you have a new supplier or there is a new product.

Exhibit 12.7 is also a good example of how it can be used to make good business decisions.

For question 3, it is simple. Looking at the data you see in the learning rate column, is the number higher or lower? If it is higher as production volumes increase then the learning rate is higher later in the process, but if the percentages are higher earlier

For question 4, the experience curve encompasses a little more than just labor. It can include all of the investments and effort that goes into improving a production process. So then, the difference is not just labor, but also cost savings. In other words, the experience curve is a measurement of cost savings.

Assignment Questions:

This chart below will help you answer the questions;

1. Given the above data, calculate the average labor per unit given the cumulative total labor hours provided (this is already given to you below, but please spend some time analyzing it with the information you learned from the book All you are doing here is dividing the number of total labor hours by the number of units. I.e. 2 units/ 10.8 of total labor hours it took = 5.4 average labor per unit).

Units	Total Labor Hours	Question 1 -Average labor per unit	Question 2 - Learning Rate
1	6	6	*****
2	10.8	5.4	10%
4	19.2	4.8	11.1%
8	35.2	4.4	8.3%
16	64	4.0	9.1%
32	115.2	3.6	10%
64	211.2	3.3	8.3%
128	384	3.0	9.1%
Overall Average improvement Rate	-------	------	------
Applicable Learning Curve	-------	-------	-------

2. Calculate the appropriate learning rate and the overall average improvement rate for this data set.(Hint: Subtract Average labor/unit of previous lower production level from the Average labor/unit of the production level for which you are trying to figure out the learning rate, then divide by the previous production level average labor/unit. See example above 6-5.4/6=10%)

3. Are gains from learning realized early in production or at a later point?

4. A learning curve applies to improvements in the direct labor portion of a process. How does the learning curve differ from the experience curve?