Taguchi Method Of Quality Control

  

Two ways you can make a thing: be mindful and careful while you’re making it so that defects at the end will be few...or prioritize speed, paying heed to defects...later. The Taguchi Method of Quality Control is all about the former.

Fixing defects and problems that are an issue of production are easier to tackle than issues of design. Fixing problems caused by design after production is already happening is bad news. Basically, you have to go back to the drawing board, and/or come up with a janky fix. Not ideal, and definitely not efficient.

The Taguchi Method of quality control is an engineering approach that puts design over production, making sure everything’s good before the design is put into mass production. This makes product research, development, and design a thorough process—but well worth it for efficiency’s sake, according to Japanese engineer and statistician Genichi Taguchi, the method maker.

He’s worked with big boys like Boeing, Toyota, and Xerox, so...he probably knows what he’s talking about. The Taguchi Method of quality control uses a statistical calculation, optimizing for efficiency while minimizing loss due to defects. The more consistent each product is with the design, the better.

The cool thing about the Taguchi Method is that efficiency includes the entire process, from start to finish. That includes things like worker safety, as injured workers count as a loss of quality in the product in the Taguchi Method calculation.

See: Total Quality Management. See: Just In Time Inventory.

Related or Semi-related Video

Finance: What is Earnings Quality?50 Views

00:00

Finance allah shmoop What is earnings quality Well it's just

00:07

math right Whatever Dot com just produced a dollar thirty

00:10

two in earnings One hundred thirty two cents of wall

00:13

street Love and profit How can there be a quality

00:16

to that number The number is a number right Well

00:19

yes but rather there are different qualities of earnings What

00:23

if we told you that one hundred percent of whatever

00:25

dot coms earnings came from Adsit sold tto forty thousand

00:29

different buyers because its website was just that popular All

00:33

of the growth came intrinsically meaning that users just loved

00:37

using the site and nothing meaningful changed on their balance

00:40

sheet or wall street Fancy engineers doing creative clever things

00:44

with the selling of money Other than that the cash

00:47

account went up because dead profits and they kept him

00:50

okay Those air very high quality earnings Really sure about

00:54

that C we threw a curveball in there We do

00:57

that all the time All right Well what if we

00:58

told you that seventy percent of their ad sales came

01:01

from a subsidiary in china and were all collected in

01:05

our m b the chinese currency and that in this

01:08

quarter well that the chinese currency appreciated thirty eight percent

01:12

relative to the dollar Well essentially all of their big

01:16

growth The big growth that we thought was such high

01:18

quality earnings came because the chinese currency did well not

01:22

because their business did all that well so wait Had

01:26

the chinese currency just been flat the company wouldn't have

01:29

earned anything close to a dollar thirty to seventy percent

01:33

of the sales and almost forty percent of currency gain

01:37

there Well it means that the company happened to have

01:40

a lot of sails in a country with a fast

01:42

appreciating currency It wasn't necessarily a direct reflection that the

01:46

company was doing so well and had such high quality

01:49

earnings Yeah it's great that they were in a hot

01:51

market and highly appreciating currency but if the currency hadn't

01:54

gone up so much relative to the u s dollar

01:56

in which they report their earnings toe wall street while

01:59

the real urn things end of the company would have

02:01

been more like a dollar maybe less so that it

02:04

be low quality earnings What about high quality earnings Well

02:09

really simply you said you'd sell three hundred tractors this

02:13

quarter the street thought you'd sell three hundred ten You

02:16

actually sold three hundred twenty you said margins would be

02:19

twenty percent The street thought they'd be twenty two percent

02:22

and they actually were twenty five percent You said you

02:25

generate twenty million dollars in cash the street thought you

02:28

generate twenty two and you actually did generate twenty five

02:32

million dollars in cash High quality financial results Simple You

02:36

just did your core business Selling tractors well Quality earnings 00:02:41.233 --> [endTime] quality tractors

Up Next

Finance: How is inventory managed for cash flow purposes?
3 Views

How is inventory managed for cash flow purposes? In order to avoid the cost of carrying slow moving or out of favor inventory that would take space...

Find other enlightening terms in Shmoop Finance Genius Bar(f)