PRESENT WORTH OF EXTERNAL QUALITY LOSSES FOR SYMMETRIC NOMINAL-IS-BETTER QUALITY CHARACTERISTICS

Abstract

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 com-pounding.-As a result, the present worth of expected losses is introduced as a moans 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.

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