What is a learning curve?
A learning curve is a concept that graphically represents the relationship between cost and output over a defined period of time, normally to represent the repetitive task of an employee or worker. The learning curve was first described by psychologist Hermann Ebbinghaus in 1885 and is used as a means of measuring production efficiency and forecasting costs.
In the visual representation of a learning curve, a steeper slope indicates that initial learning results in higher cost savings, and subsequent learning results in increasingly slow and more difficult savings.
Key points to remember
- The learning curve is a concept that describes how new skills or knowledge can be acquired quickly at the start, but later learning becomes much slower.
- The slope of the learning curve represents the speed at which learning translates into cost savings for a business.
- The steeper the slope of the learning curve, the greater the cost savings per unit of output.
Understanding the learning curves
The learning curve is also called the experience curve, cost curve, efficiency curve or productivity curve. Indeed, the learning curve provides a measure and an overview of all the above aspects of a business. The underlying idea is that every employee, whatever their position, takes the time to learn how to perform a specific task or duty. The time required to produce the associated output is high. Then, as the task repeats, the employee learns to complete it quickly, reducing the time required for an output unit.
This is why the learning curve slopes downwards at the beginning with a flat slope towards the end, with the cost per unit represented on the Y axis and the total production on the X axis. As learning increases, it decreases the cost per unit of output initially before flattening, because it becomes more difficult to increase efficiency gains through learning.
Benefits of using the learning curve
Companies know how much an employee earns per hour and can calculate the cost of producing a single production unit based on the number of hours required. A well-placed and ready-to-succeed employee should reduce costs per business unit of production over time. Businesses can use the learning curve to perform production planning, cost forecasting and logistics schedules.
The learning curve clearly describes the cost per unit of output over time.
The slope of the learning curve represents the speed at which learning translates into cost savings for a business. The steeper the slope, the greater the cost savings per unit of output. This standard learning curve is known as the 80% learning curve. It shows that for each doubling of the production of a company, the cost of the new production is 80% of the previous production. As production increases, it becomes increasingly difficult to double a company’s previous production, represented using the slope of the curve, which means that cost savings slow down over time.