Experience curves are a good way set realistic targets for projects. This is especially true of incremental or next-generation projects where the performance is often times an extension of past improvements. Experience curves are typically generated by plotting the log of performance versus the log of the years since the attributes tracking began. The reason for plotting the log of the attribute versus long time is to obtain a straight line. This is most useful baggage of managing teams can visually extrapolate performance from straight-line plots. An example of this is shown in the “Experience Curve for Product Performance Versus Years Product Is Been Manufactured” figure.
In the “Experience Curve for Product Performance Versus Years Product Is Been Manufactured” figure we see three different product variations is shown in the yellow, green, and red dots. Yellow dots represent a first-generation technology in the slope with that line is less than has been provided by the green dots which correspond to a second-generation technical solution. What is clearly shown is that the third-generation solution possesses attributes that allows its performance versus cost to be improved in a much higher rate than previous generations. Such a graph shows a management team graphically how different the new technology is from the past technologies is seen and experienced. It’s also useful tool the plot targets that business unit might want. In this case of the red dots represented targets he would be easy for the technical group to show why a completely different technical or manufacturing process would be needed to create that performance is from the experience curve it would be many years before the drink green technology would achieve that level of performance.
The “Example Experience Curves” figure shows how costs can decrease in a predictable manner by three different approaches. Note here that the x-axis is not time but log of the cumulative units produced. The cumulative units produced is often a good way to track the improvements being made to a next generation or breakthrough technology implementation.The y-axis is also log scale.
Experience curves are a quick way to see whether or not the proposed costs in a project plan are realistic. A rule of thumb when using the log cumulative units metric is at the slope for many manufacturing projects is approximately 0.85.