Inventory Management & Learning Curves

Question 1

Associated costs

Answer 1

Purchasing, ordering, carrying, stockout, quality and shrinkage

Question 2

Learning curves

Answer 2

Function that shows how labour hours/units decrease as units of production increase, because of learning.

Question 3

Types of LC

Answer 3

Cumulative average time learning model (CAT) and Incremental unit time learning model (IUT)

Question 4

CAT

Answer 4

Cumulative average time decreases by constant % each time the cumulative quantity of units produced doubles.

Question 5

IUT

Answer 5

Incremental unit time (time to produce last unit) decreases by a constant % each time the cumulative quantity of units is doubled.

Question 6

CAT formula

Answer 6

y = pX^q and q = ln(%)/ln2

Question 7

CAT formula meaning

Answer 7

y: cumulative average time/unit
p: time taken to produce 1st unit
X: cumulative number of units produced
q: index of learning

Question 8

IUT formula

Answer 8

m = pX^q and q = ln(%)/ln2

Question 9

IUT formula meaning

Answer 9

m: time taken to produce last single unit
p: time taken to produce 1st unit
X: Cumulative number of units produced
q: index of learning

Question 10

Uses of learning curve

Answer 10

To predict how labour hours or $ will increase as units are produced. Useful for budgeting, setting standards, evaluating performance, pricing, make/buy.

Question 11

Limitations of learning curve

Answer 11

Repetitive labour jobs are decreasing.
Assume a constant learning rate.
Constant turnover of staff.
Complications of product/labour mix.
Effect of motivation.