Using target costing concept in loss function and process capability indices to set up goal control limits

This paper depicts the relationship among the loss function, process capability indices and control charts to establish goal control limits by extending the target costing concept. The specification limits derived from the reflected normal loss function is linked through the C_pm value, computed either directly from the raw data or given by management or engineers, to conventional control charts to obtain goal control limits. The target value can be taken into consideration directly. The advantages of applying the target costing philosophy are also discussed. This paper explains, from a quantitative approach, that reducing process variation is not enough to solve quality problems. In fact, reducing process variation should be used along with bringing the process mean to the target value.