Experience Curve

   

Definition: an Experience Curve is the phenomenon of a relationship between experience and efficiency as well as between efficiency gains and investments in the effort due to various learning factors.
In 1968, BCG Consultant Henderson began to emphasize the implications of the EC for strategy. He found EC effects for industries ranging between 10 to 25 percent.
Henderson's Law is: Cn = C1 * n-a.
In other words, the Cost of the nth unit of production equals the Cost of the 1st unit of production * the Cumulative volume of production to the power of minus the Elasticity of cost with regard to output.


   

   

More on experience curves.
More on manufacturing: 5 Whys, Changeover, Contract Manufacturing, Cradle to Cradle, Five S, more...



   

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