SourcingApps
Experience Curve Analysis
Show Example
..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.
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