Understanding the Taguchi Loss Function | AlisQI

Imagine you’re a Quality Control Manager for a paint manufacturer, and you discover slight color differences in one of your batches. While the product is still within specification limits, even a slight deviation from the target performance can lead to customer dissatisfaction. How can you quantify the cost associated with your batch and ensure the target values? That is where the Taguchi loss function comes in – a vital tool in measuring the cost of poor quality from a customer’s perspective.  

Let’s explore how manufacturers can apply the Taguchi loss function and how this powerful concept highlights the prevention-first mindset.  

How big of a loss? 

The Taguchi loss function was developed by Dr. Genichi Taguchi, a renowned Japanese statistician and quality control expert. In typical Japanese fashion, Taguchi strived for perfection. The function using his name considers the difference or loss between a customer’s desired value (the target value) of a product and the actual value that is achieved (even if that is within the specification limits). More specifically, the Taguchi loss function assesses the financial impact considering these three factors: 

• The loss caused by a defect. Measures the impact of the defect for the customer. This can be the cost of reworking or replacing the defective product, the cost of lost time or productivity and other factors.  
• The number of defects. Measures the overall quality of the product and manufacturing process. Of course, the higher the number of defects, the lower the level of quality. 
• The number of units produced. More units equal larger overall loss if there are defects in the product or manufacturing process.
  
  

Applying the Taguchi loss function 

According to Taguchi, even a slight deviation from the target performance can lead to customer dissatisfaction. As the deviation increases, the customer's dissatisfaction may also increase exponentially. To effectively apply the Taguchi loss function, it is crucial to understand the main variables involved in its calculation:

• Specification limits:
  These are the minimum and maximum acceptable values of a product's characteristic s . Any product falling outside these limits is considered defective.

• Target values:
  This is the ideal or intended value for a product's characteristic s , representing the highest level of customer satisfaction.
• Variability:
  This refers to the dispersion or spread of the product's characteristic values, which directly impacts customer satisfaction.  

Interestingly, the Taguchi loss function is unique in that a zero deviation indicates zero loss. However, any non-zero deviation - even within Six Sigma range - incurs some nominal loss. The amount of loss increases gradually as the deviation increases, which helps manufacturers better understand the true costs associated with their business processes. This, in turn, arms them with valuable ammunition to improve efficiency and reduce overall wastage. Using the Taguchi loss function, they can compare different options, reduce variation in the manufacturing processes and identify what will result in the lowest overall loss and cost.  

Taguchi loss function and a smart QMS 

What do the Taguchi loss function and a smart QMS have in common? They both emphasize that manufacturers should focus on prevention since this is far more cost-effective than dealing with the aftermath of correcting defective products.   

AlisQI, our cloud-based quality management system was designed to help manufacturers work smarter, not harder. We automate data collection, data analysis, project management and other routine tasks so that manufacturers can focus on continuous improvement.  

To be more specific, these are the main ways in which AlisQI can help you focus on prevention and keep the cost of quality loss due to deviations at a minimum: 

• Analytics for all quality processes to detect deviations 
• Root cause analysis to identify both symptoms and causes of deviations 
• Calendar to regularly schedule audits and management reviews 

• Built-in risk assessment methodology 
• Action lists e.g. CAPA for managing changes 
• Workflows for products and processes that isolate changes and create follow-up actions 
• Analytics with time filters to compare pre/post adjustment performance 
• Visual snapshots to summarize PDCA results 
• Automated triggers to evaluate the effectiveness of actions 
• Workflow engine to steer adjusted processes 

Want to discuss your case and understand the full extent of how AlisQI can steer you away from deviation and always ensure target values? Schedule a chat with our team.