Abstract
Cost is a major driver in many, if not all, of the decisions that a firm must make. Thus, in determining a level of quality improvement (as measured by process capability), cost is a major consideration—especially for those firms that produce limited amounts of a particular product, have a product that is late in the product life cycle, or have budgetary constraints. This article addresses the question of how much should be spent on process improvement with respect to improvement in process capability. Using the Taguchi loss function, a cost/savings model is developed as a decision-making tool for firms with product life-cycle and budgetary constraints.
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