What is the experience curve?

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The experience curve is a form of learning curve that leverages more information to properly assess the state of a given situation. First described in 1960 by Bruce Henderson, an experience curve is used to examine the relationship between production costs and production quantity. The general idea behind the curve is that as necessary actions in the production process are repeated over time, the cost of performing those actions will decrease.

Unlike the basic learning curve, which tends to focus more on the work aspect, the experience curve covers a wider range of elements that impact the production process. This includes elements such as marketing strategies and costs, administration, the cost of distribution, and costs associated with manufacturing, such as the cost of raw materials. This more detailed approach can make it much easier to determine whether the cumulative cost of producing each unit is in fact falling. If this is not the case, the shape of the curve can help identify areas where improvements can be made and trigger this cost reduction trend.

For example, plotting the experience curve can help identify ways to minimize slow points in the production process and thereby increase production and reduce overall cost per unit. For example, if a manufacturing process requires machinery to be stopped for twenty minutes while a new batch of raw material is loaded into the machine, the solution may be to purchase larger batches. This change makes it possible to load the machine to its full capacity and allow it to run longer before more materials are needed. If this process change results in reduced downtime by 25%, the same type of tasks will eventually produce more goods for sale in the same amount of time, which in turn helps reduce the cost invested in each unit.

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Effectively using the experience curve requires companies to look closely at any element that could affect the process and the cumulative amount of production. Changes in technology may make it possible to perform the same tasks and maintain the same level of production, but use fewer resources such as labor. Looking closely at each step of the manufacturing process can result in the reorganization of the task sequence, resulting in greater productivity. In some cases, tasks can be repetitive and unnecessary for the production process and can be eliminated altogether.

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