Present Worth of External Quality Losses for Symmetric Nominal-is-Better Quality Characteristics

摘要

An extension of the Taguchi Loss Function (TLF) is used to model quality losses due to product degradation as a continuous cash flow function under continuous compounding. As a result, the present worth of expected losses is introduced as a means to provide a monetary evaluation of external quality losses (losses incurred by a product's user). Using such a financial index, it is shown that for a SNIB product characteristic, a manufacturer's aim to set a process on target (as advocated by modern quality philosophies) does not necessarily lead to reducing the user's quality losses.