Adding Value To Society

EP Editorial Staff | September 14, 2012


What’s the concept of quality losses got to do with maintenance? More than you might have thought.


0912strawn2The Quality profession has lost another icon: Genichi Taguchi died on June 2, 2012. Along with Deming, Juran and Ishikawa, Dr. Taguchi was a true pioneer of the modern Quality movement. 

Born in Japan in 1924, Taguchi served in the Astronomical Department of the Navigation Institute of the Imperial Japanese Navy during World War II. From the 1950s to the ‘70s, he worked for the Japanese government and several companies in developing what became known as the Taguchi Methods: statistical approaches for improving the quality of manufactured goods. Interestingly, Taguchi Methods were largely unheard of outside Japan for many years. It wasn’t until the 1980s that they became established elsewhere.

At this point, you may be asking, “What does all this have to do with the maintenance profession?” My answer: “Plenty.”

Putting things in context
Working as a maintenance supervisor early in my career, I became fascinated by Quality Engineering. In the early 1990s,I attended a workshop at the California Institute of Technology in Pasadena, to hear Dr. Taguchi speak on the Taguchi Methods. Listening to him, I found myself captivated by the Quality Loss Function he developed in the 1970s. This graphical depiction of “loss” describes a phenomenon affecting the value of products produced or manufactured by a company: It establishes a financial measure of the end-user’s dissatisfaction with a product’s performance as it deviates from a target value.

Taguchi’s quality loss concept showed us that quality does not suddenly nosedive when, for example, a machinist exceeds specification limits prescribed in the design blueprints. Instead, “loss” in value progressively increases as variation increases from the intended target value, which is much more rigorous. This was considered breakthrough thinking in describing quality losses. It subsequently helped fuel the continuous-improvement movement that has since become known as Six Sigma and Lean Manufacturing.

Dr. Taguchi likened the specification limits to goal posts used in football. Old-school thinking suggested that to score (achieve quality targets), you only needed to kick the ball between those posts (specification limits). Many in the quality profession were happy to get the “value” somewhere between the specification limits or “goal posts.” To them, that would be “good enough” (see Fig. 1).


Fig. 1. Dr. Taguchi likened specification limits to football goal posts. Old-school thinking suggested that to “score” (or achieve quality targets), you only needed to kick the ball
between the goal posts. Many in the quality profession felt that getting “value” somewhere between those posts was “good enough.”

Dr. Taguchis key argument was that the cost of poor quality goes beyond direct costs to the manufacturer—such as rework or waste costs. He pointed out that loss occurs as soon as there is a deviation from the target value. In addition, he theorized that the loss isnt linear but, in fact, is proportional to the square of the distance from the target value (see Fig. 2). 


Fig. 2. Dr. Taguchi theorized that loss isn’t linear, but is proportional to the square of the distance from the target value. He stated that any deviation from the Target Value (y) was a loss.

It’s not good enough to “kick” between the goal posts (or specification limits). To achieve the least loss, you must hit the target value—not merely every once in a while, but the first time and every time. (Figure 3 describes this phenomenon.)


Fig.3. To achieve the least loss, you must hit the target value the first time and every time. “Once in a while” is not acceptable.

In Fig. 3, we see a narrow histogram centered on the “target value.” This suggests that there has been very little deviation from the target value and, as a result, very little loss to the company in the form of waste, scrap and rework—those things we refer to as quality losses. Ideally, there would be no deviation from the target value and, therefore, no losses. In reality, the shape in Fig. 3 is what we most likely will end up with: close, but not perfect.

Outside the plant 
Dr. Taguchi expanded on his definition of quality loss as “the loss imparted to society from the time the product is shipped.” He proposed that it included both company costs, such as rework, scrap and maintenance, and any loss to the customer through poor product performance and reduced reliability. But it can go further. 

Let’s consider an example of quality losses in the context of “loss to society.” If a car breaks down in the middle of an intersection due to a defect inherent in the design of the engine, the driver not only suffers (i.e., inconvenience, frustration, towing, repair expenses, etc.), all other drivers that are inconvenienced or even endangered by the stalled car suffer loss.

It was Dr. Taguchi’s term “loss to society” that resonated with me. One of my instructors described it another way—which might explain Japanese industries’ motivation for eliminating losses. After World War II, the Japanese economy was devastated. To rebuild it based on manufacturing required enormous natural resources. Unfortunately, Japan, as a country, has few, if any, natural resources. Its manufacturers must import most of the raw materials used in their processes. 

As a result, Japanese operations had to become very good at reducing and eliminating waste, rework and, ultimately, losses, all of which impact the bottom line. With limited or no natural resources, attacking and eliminating quality losses was the only way Japan’s industries could compete on a global scale. If they couldn’t meet this challenge, their society would suffer.

When any company has losses, they impact the bottom line and eventually society. Let me explain… 

If a company is unprofitable, it will struggle to compete in its market. If it loses market share, its sales will drop, as will its revenue and profits. In the end, its shareholders will be unhappy and the company will be unable to expand its product line, hire new employees or retain the professionals and technical staff it already has. Such consequences will clearly impact the community and the lives of those who live near this factory or plant. In other words, as Dr. Taguchi warned, the company’s own losses impact society. 

Maintenance takeaways 
As maintenance professionals, we have more control over quality losses (and, in turn, what Taguchi termed “losses to society”) than we might have thought. Consider the fact that when we fail to achieve our targets, we cause our company to incur losses. It’s not the isolated, one-time occurrence we need to focus on: 

  • It’s the cumulative effect of falling short with our PM schedule compliance that ultimately leads to failure of critical equipment. (In turn, failure of critical equipment could expose our technicians to a life-threatening risk or cause an environmental release.)
  • It’s failing to get good job plans out to the technicians, causing waste, delays, and more downtime, all of which can impact our production and ultimately sales.  
  • It’s allowing failures to occur over and over and accepting it as the status quo. 
  • It’s allowing delays and interruptions to be the norm, rather than the exception, which will have a huge influence on a company being profitable or folding.  

It’s the effect of these occurrences and more that impact not just the bottom-line of a company, but also the employees of the plant, the contractors who work there, the vendors who supply the facility and all the other lives that are affected by the company’s success or failure. Failure to hit one of our targets could literally destroy an operation and/or a company.

Performing good maintenance and hitting our targets is about more than just reducing costs and improving reliability of the equipment. Performing good maintenance reduces the losses that Taguchi spoke about. Reducing losses increases an organization’s profitability and improves the livelihood of employees and community stakeholders, whose lives are tied to the success of the company. Performing good maintenance, in a nutshell, adds value to your plant, company, community and even society. MT

Tracy Strawn is VP of International Programs for Marshall Institute, an international maintenance and reliability consulting and training company, headquartered in Raleigh, NC. Strawn has 25 years of experience in industry and is a Certified Maintenance and Reliability Professional. Telephone: (919) 834-3722; email:





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