Economic design of control charts using the Taguchi loss function

We embellish Duncanʹs cost model with Taguchiʹs loss function to incorporate losses that result from both inherent variability due to assignable causes. Whereas Duncan applies a penalty cost for operating out of control, he does not show how this cost can be obtained or quantified. We illustrate, analyze, and evaluate this model utilizing hypothetical cost figures and process parameters. We also suggest adjustments to control chart design parameters when there are process improvements over time.