Development of realistic quality loss functions for industrial applications

A number of quality loss functions, most recently the Taguchi loss function, have been developed to quantify the loss due to the deviation of product performance from the desired target value. All these loss functions assume the same loss at the specified specification limits. In many real life industrial applications, however, the losses at the two different specifications limits are often not the same. Further, current loss functions assume a product should be reworked or scrapped if product performance falls outside the specification limits. It is a common practice in many industries to replace a defective item rather than spending resources to repair it, especially if considerable amount of time is required. To rectify these two potential problems, this paper proposes more realistic quality loss functions for proper applications to real-world industrial problems. This paper also carries out a comparison studies of all the loss functions it considers.