Page "Taguchi methods" Paragraph 11

He therefore argued that quality engineering should start with an understanding of quality costs in various situations.

In much conventional industrial engineering, the quality costs are simply represented by the number of items outside specification multiplied by the cost of rework or scrap.

However, Taguchi insisted that manufacturers broaden their horizons to consider cost to society.

Though the short-term costs may simply be those of non-conformance, any item manufactured away from nominal would result in some loss to the customer or the wider community through early wear-out ; difficulties in interfacing with other parts, themselves probably wide of nominal ; or the need to build in safety margins.

These losses are externalities and are usually ignored by manufacturers, which are more interested in their private costs than social costs.

Such externalities prevent markets from operating efficiently, according to analyses of public economics.

Taguchi argued that such losses would inevitably find their way back to the originating corporation ( in an effect similar to the tragedy of the commons ), and that by working to minimise them, manufacturers would enhance brand reputation, win markets and generate profits.