Why the First Week Loses Money: Putting the Learning Curve into the Quote

AI Process Analysis series 4/6 · (4) Why the first week loses money

Anyone who has stood at the back of a line on the morning a new style goes in knows the feeling. Nobody is slacking. If anything they are tenser than usual. And the pieces are not coming out.

The supervisor is running between stations, operators are watching their neighbours’ hands, and the first pieces come back from QC. A day of that ends at about half the target. And that evening the head office calls to ask why the output was so low.

This post is about answering that call with numbers. Every screen and figure is example data, from order DR-2026-001.

A slow first day is a design value, not an accident

A sewing line is not a machine that runs at rated speed the moment you flip the switch. It is several dozen people learning motions they have never seen. So the same line with the same people produces differently on day one and on day ten. That is the learning curve.

The example screen writes the curve out as numbers.

“standard learning-curve rate (Day 1 40% … Day 5 100% … Day 15 115%) × 496 pcs / day”

Day 1 produces 40% of the daily target, Day 5 reaches 100%, and Day 15 climbs to 115%. The daily target it works against is Production Target 496 pcs.

What matters is that this curve is not a chart drawn after production finished. It is a design value laid in at the quoting stage. The 40% on day one is not an accident. It is scheduled.

Loss, recovery, and the break-even day

The example screen splits the curve into three parts. Know these three and you have read the whole graph.

Loss (A) 5 days. The stretch below the target line. Output in this period falls short, and the shortfall is a loss.

Recovery (B) 10 days. The stretch above the target line where the earlier shortfall is paid back. The relation is written on the screen: Recovery (B) = 2 × A.

BEP Day 15. The day loss and recovery cancel out. From here the line finally earns what the plan said it would.

Why recovery is set at twice the loss period

Because the drop below the target line is far deeper than the climb above it. Day 1 starts at 40% of target. The highest point, Day 15, only reaches 115%. A large shortfall has to be made up in small increments, which takes longer.

SIJE runs this as the 1 to 2 rule. A loss period A is accepted, recovery is set at twice that, and the break-even day is A plus B, or three times A.

Line the numbers up and it is not a coincidence. Lay out the standard daily rates and the curve starts at 40% on Day 1, reaches the target line on Day 5, and hits 115% on Day 15. Add up everything below target from Day 1 to Day 4 and it comes to 115% of a day’s target. Add up everything above target from Day 6 to Day 15 and it also comes to 115%. The two areas match exactly on Day 15.

Percentages are hard to feel, so put them in money. Say a line costs $1,000 a day. That cost is set by headcount, working minutes and cost per minute, and it goes out whether or not the order changes. On Day 1 only 40% of a day of work comes out, so $600 goes unrecovered. Day 2 leaves $350, Day 3 leaves $150, Day 4 leaves $50. By the end of Day 4 the running total is $1,150 short.

From Day 6 the direction reverses. Everything above target counts as recovery: $50, then $70, then $100, and on to the $150 on Day 15, at which point the running total comes back to exactly zero. An order that finishes before Day 15 settles while that total is still negative. The $1,000 is a stand-in used to show the arithmetic, unrelated to the actual cost of the example order.

So a three day loss period gives six days of recovery and a break-even on Day 9. For orders of 2,000 pcs or fewer, Day 1 starts lower at 20% and break-even moves out to Day 17. The smaller the order, the worse the curve starts.

The curve keeps climbing after Day 15. From Day 16 it rises one point a day to 134% on Day 34, then holds at 135%. The longer the same style runs, the wider the margin the line earns.

Which number goes into the quote

This is the most practical part of the post. The CM basis on the example screen carries two daily outputs.

Production Target 496 pcs is what comes off the line once it is up to speed. That is the floor’s target. Costing Target 424 pcs is the figure used to calculate cost. That is the quote’s target.

The gap between them is the learning curve. An order runs across slow days as well as fast ones, and the Costing Target is drawn from a running average that includes them. Quote on 496 and ignore the slow days, and the order is profitable only on paper.

The same screen carries the values that explain the gap: Loss Time 15.00 %, Factory Rate 70.00 %, Working Day 7 days, Unit Per Hour 62 pcs, Unit per Person Hour 1.39 pcs. These are the constants describing the factory’s condition. Loss Time is set by the country the factory sits in, and the factory on the example order is in Vietnam.

These are the first fields I check on a quote. Whether the Factory Rate is last year’s number carried over, whether the Loss Time belongs to this factory. Get them wrong and everything downstream is honestly wrong.

The trap in a seven day order

The bottom of the example screen reads Order 3,000 pcs · Est. 7 days. And the BEP is Day 15.

Put those two lines side by side and something heavy shows up. This order finishes before it reaches break-even. The style changes just as the line is getting the hang of it and picking up speed.

Which is why short orders have to carry a higher price. Run the same style again and the second order starts near 100% from day one. That is the reason to ask a buyer how many times a year the style comes back. It is not sales greed. It is the cost structure.

When the price gets cut, what gets smaller

The price section of the example screen is three lines.

What process analysis produced is CM Price $3.28. A New Standard factor of 0.9 brings it to Final CM $2.95. Ten percent the company took off itself.

Cutting a price is ordinary enough. The trouble starts when nobody asks where that ten percent comes from. Out of a steeper learning curve, out of fewer operators, or simply out of the factory. As the last post showed, cut the operators and the bar runs over Takt, and a line whose bars run over does not make its target.

That these three lines sit on one screen matters. When the cut and the basis for it live apart, nobody remembers the reason a few months later.

Using it at the negotiating table

The learning curve chart is not a picture only the costing person looks at. It is something to put in front of a buyer.

Say that the first five days fall short, that recovery needs another ten, that break-even lands on Day 15, and that this order runs seven days, and the price conversation moves from feelings to numbers. Instead of answering a request for a discount with a no, you can answer with the conditions under which it is a yes.

More units, the same style repeated, a few more days on the delivery date. All of them are conditions that can be explained on this curve.

The meeting changes subject

I used to look for excuses when the first week came in badly. Materials were late, there were too many new operators, the buyer changed the spec. All true, and none of it made the next order any better.

Draw the curve in advance and the story changes. A weak first week stops being an incident to explain and becomes a cost already sitting in the quote. And the meeting moves from whose fault it was to when it recovers.

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Next: When the Lowest Unit Price Is Not the Optimal Factory: Checking the Line Schedule First

The next post covers why the lowest unit price is not always the optimal factory, and why the line schedule gets checked first.