Experience Curve Analysis Example Home Page Back to NoteBook Summary Download Demo |
Sourcing Decision Support,
Inc. Experience Curve Analysis..What should the
price be if you continue to buy additional quantities of the same item to
your specifications?
The Boston Consulting Group performed studies that found non-labor as well as labor related costs followed a composite learning curve and label it the "experience effect." Experience curves can be very useful in forecasting future prices for items that are purchased on a repetitive basis. All you need is an initial price and the "experience effect" for the industry or process to forecast the price of additional quantities. Experience curves for select industries and processes are as follows: aerospace 85%; complex machine tools 75-80%; construction operations 70-90%; contract manufacturing 85-90%; raw materials 93-96%; repetitive clerical tasks 75-85%; custom integrated circuits 70%; and repetitive electronics manufacturing 90-95%.
For additional information on this subject see: Notes on the Use of Experience Curves in Competitive Decision Making, Gerald B. Allan and John S. Hammond, III Harvard Business School, No. 175-174 and The Boston Consulting Group, Perspectives on Experience, Boston, MA, 1970. |