A proposal for an economic quality loss function

Johannes Freiesleben

International Journal of Production Economics, 2008, vol. 113, issue 2, 1012-1024

Abstract: Quality loss functions have found widespread application in production engineering and today are an indispensable part of quality management. However, they share an obstacle with most other quality concepts concerning their limited communicability to top management. In the allocation of financial resources, a company's executive board is commonly interested in the profit implications of competing projects, but existing concepts fail to capture the profit impact of changing quality levels, thus putting quality initiatives at a disadvantage compared with more "classical" investment opportunities. To address this problem, in this paper, we propose a new type of function we call "economic quality loss function." The suggested function is composed of measures for the single profit parameters and indicates how sensitive a company's profit function is to defect levels. By providing a simple comprehensive measure, it helps the practitioner evaluating quality initiatives and communicating their desirability to top management.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0925-5273(07)00364-7
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:113:y:2008:i:2:p:1012-1024

Access Statistics for this article

International Journal of Production Economics is currently edited by Stefan Minner

More articles in International Journal of Production Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().