TAGUCHI LOSS FUNCTION AND QUALITY MANAGEMENT

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Total Quality Management MGT510

Lesson # 08

TAGUCHI LOSS FUNCTION AND QUALITY MANAGEMENT

Total Quality Paradigms

Adopting a TQ philosophy requires significant changes in organization design, work processes, and

culture. Organizations use a variety of approaches. Some emphasize the use of quality tools, such as

statistical process control of Six Sigma (which we discuss in the next chapter), but have not made the

necessary fundamental changes in their processes and culture. It is easy to focus on tools and techniques

but very hard to understand and achieve the necessary changes in human attitudes and behavior. Others

have adopted a behavioral focus in which the organization's people are indoctrinated in a customer-

focused culture, or emphasize error prevention and design quality, but fail to incorporate continuous

improvement efforts. Still other companies focus on problem-solving and continuous improvements, but

fail to focus on what is truly important to the customer. Although these firms will realize limited

improvements, the full potential of total quality is lost due to a lack of complete understanding by the

entire organization.

Single approaches, such as statistical tools, behavioral change, or problem solving can have some short-

term success, but do not seem to work well over time. Total quality requires a comprehensive effort that

encompasses all of these approaches. A total change in thinking, not a new collection of tools, is

needed. Total quality requires a set of guiding principles. Such principles have been promoted by the

many "quality gurus" Deming, Juran, and Crosby, Ishikawa and Taguchi. Their insights on measuring,

managing, and improving quality have had profound impacts on countless managers and entire

corporations around the world.

Defining Quality as Loss Function

Taguchi (1986) suggests that there is increasing loss, for the producer, the customer, and society,

associated with increasing variability, or deviation from a target value that reflects the "ideal state." This

relationship to variability can be expressed as a loss function, as shown for the distribution of rods from

grinding operation C, in Figure 12. The greater the variability, deviation from target, the greater the loss

will be.

Traditional specifications, used in the manufacturing-based approach to quality, define conformity n

terms of upper and lower specification limits. For example steel rods should meet the engineering

specification for length of six inches, plus or minus 10 one-hundredths o an inch (6 + or _ .10). This

approach tends to allow complacency concerning variation within that range. It assumes that a product

just barely meeting specifications, just within the limit, is just as "good" as on right in the middle, but

one just outside the limit is "bad." Taguchi questions these assumptions, and suggests the degree of

"badness" or "loss" increases gradually as the deviation from the target value increases. Although

managers may choose to do the right thing (the target), in order to provide superior value to customers

through superior "quality," they must also continuously improve their systems and reduce variation to

meet the target.20 In the 1980s, Motorola committed to a campaign called Six Sigma, which is one way

of saying reduce variation so much that the chance of producing defects is down to about 3.4 defects per

million, or 99.99966 percent perfect.

Total Quality Management MGT510

Taguchi's loss function: loss increases as a function of variation

Loss ($)

due to variation

Distribution of output

Length of rod in

inches

6.1

6.0

5.9

USL

Target

LSL

The Deming Management Philosophy

Deming was trained as statistician and worked for Western Electric during its pioneering era of

statistical quality control development in the 1920s and 1930s. During World War II he taught quality

control courses as part of the national defense effort. Although Deming taught many engineers in the

United States, he was not able to reach upper management. After the war, Deming was invited to Japan

to teach statistical quality control concepts. Top managers there were eager to learn, and he addressed

21 to executives who collectively resented 80 percent of the county's capital. They embraced Deming's

message and transformed their industries. By the mid-1970s, the quality of Japanese products exceeded

that of Western manufacturers, and Japanese companies had made significant penetration into Western

markets.

Deming taught quality to Japanese and Ishikawa was Deming's student. Americans did not listen to

Deming as attentively as Japanese did and took his a prophet of quality.

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