1. The Taguchi Method: THE SERVICE MANAGER’S PRIMER TO QUALITY By Ruth Robertson, Boise State University ©2002

2. GENICHI TAGUCHI Born in Japan, 1924Born in Japan, 1924 Electrical EngineerElectrical Engineer Worked during 1950’s to improve Japan’s post-WWII telephone communication systemWorked during 1950’s to improve Japan’s post-WWII telephone communication system Father of the “Taguchi Method” and “Robust Engineering”Father of the “Taguchi Method” and “Robust Engineering”

3. Don’t run away! Not a mathematician?Not a mathematician? You can still successfully apply Taguchi Method concepts to your service business.You can still successfully apply Taguchi Method concepts to your service business. Basic concepts are simple.Basic concepts are simple. Just keep reading.Just keep reading.

4. Competitive Edge 101: “In the next century, the capability of developing robust technology will be essential to the competitiveness of any manufacturing enterprise.” (Tsai) (Taguchi: p xi)“In the next century, the capability of developing robust technology will be essential to the competitiveness of any manufacturing enterprise.” (Tsai) (Taguchi: p xi) Substitute “robust services” and “service enterprise.” You need this.Substitute “robust services” and “service enterprise.” You need this.

5. Competitive Edge 102: “To compete successfully in the global marketplace, organizations must have the ability to produce a variety of high-quality, low-cost products that fully satisfy customers’ needs.” (Robust Engineering; p. xiii)“To compete successfully in the global marketplace, organizations must have the ability to produce a variety of high-quality, low-cost products that fully satisfy customers’ needs.” (Robust Engineering; p. xiii)

6. Quality Defined “Any engineered system reaches its ‘ideal function’ when all of its applied energy (input) is transformed efficiently into creating desired output energy.” (Robust p. 6)“Any engineered system reaches its ‘ideal function’ when all of its applied energy (input) is transformed efficiently into creating desired output energy.” (Robust p. 6) Employee energy = inputEmployee energy = input Customer satisfied = outputCustomer satisfied = output

7. Basic Ideas: CUSTOMER SATISFACTIONCUSTOMER SATISFACTION Design to the highest standards early in the process to eliminate all non-random errorsDesign to the highest standards early in the process to eliminate all non-random errors Quality Loss = Loss to Society quantified through “Quality Loss Function”Quality Loss = Loss to Society quantified through “Quality Loss Function” Variation (+/-) from optimal measure results in a loss.Variation (+/-) from optimal measure results in a loss. For best results, GET HELP.For best results, GET HELP.

8. Resources Expended on Quality $ Design $$ Service Delivered $$$$$$$$$$ Post Service Delivery

9. Customer Satisfaction Ways to measure service:Ways to measure service: 1. Returning customers 2. Number of complaints (1:10) 3. Number of compliments 4. Employee attitude

10. Design Equipment – No breakdownsEquipment – No breakdowns Specific jobs defined – Need to know responsibilitiesSpecific jobs defined – Need to know responsibilities Policies and Procedures – What do you want, anyway?Policies and Procedures – What do you want, anyway? Taguchi Method experimentTaguchi Method experiment

11. Quality Loss Concept Deviation from target results in loss.Deviation from target results in loss. –Lower than target –Greater than target –Both lose

12. Quality Loss Function Quantify the LossQuantify the Loss Warning:Warning: Next slide contains math formulas But give it a try!But give it a try!

13. Quality Loss Function II L(y) = k(y-m) 2 L(y) = Loss k = constant = cost to correct tolerance 2 y = reported value m = mean value (average) (Taguchi On Robust Technology p. 22)

14. Example: Company C received an average of 10 complaints per month last year. In November they received 15 complaints (y). Management sets an acceptable level at 2 (tolerance).Company C received an average of 10 complaints per month last year. In November they received 15 complaints (y). Management sets an acceptable level at 2 (tolerance). It costs the company $50 directly per complaint to correct the problems. They determined the cost in lost sales to be $100.It costs the company $50 directly per complaint to correct the problems. They determined the cost in lost sales to be $100. Total cost per complaint: $150Total cost per complaint: $150

15. Example continued: k = $150/2 2 = $37.50 L(y) = 37.50 (15-10) 2 = 37.50 (5) 2 = 37.50 (25) = $937.50 is loss for the month of November

16. MATH DONE!

17. Taguchi Experiment – Steps According to Dr. Foster: (OM Review p. 38-44) Managers’ job:Managers’ job: –Identify the Problems –Brainstorm –Contribute to experiment design Facilitator’s job:Facilitator’s job: –Design experiment –Run experiment –Analyze results –Confirm experiment

18. Step 1: Problem Identification What do managers and/or employees see that need improvement?What do managers and/or employees see that need improvement?

19. Step 2: Brainstorming Identify critical variables in the service that affect quality.Identify critical variables in the service that affect quality. Open and honest discourse with all people involved.Open and honest discourse with all people involved. Decide which factors are controllable and which are not.Decide which factors are controllable and which are not.

20. Step 3: Experiment Design Using results from brainstorming session, facilitator will design an experiment.Using results from brainstorming session, facilitator will design an experiment. Management must understand this part, and needs to fully support the resources needed for it.Management must understand this part, and needs to fully support the resources needed for it.

21. Step 4: Experiment Use of ANOVA requires managers understand its use.Use of ANOVA requires managers understand its use. Facilitator, although in charge of the experiment, must assure management’s understanding of the process.Facilitator, although in charge of the experiment, must assure management’s understanding of the process.

22. Step 5: Analysis Factors closest to target specification identified.Factors closest to target specification identified. Means to reduce controllable variation produced.Means to reduce controllable variation produced.

23. Step 6: Confirm Experiment Set up new system using data from experiment.Set up new system using data from experiment. Test and validate results.Test and validate results.

24. Conclusion: Best improvement is early in the process.Best improvement is early in the process. Use expert consulting help for full experiment and implementation.Use expert consulting help for full experiment and implementation. Successfully used in airlines, insurance, hotels and restaurants.Successfully used in airlines, insurance, hotels and restaurants. Quality is a major feature that sets a service apart from the rest.Quality is a major feature that sets a service apart from the rest.

25. Citations: Foster, S. Thomas Jr. Ph. D.: “Designing and Initiating A Taguchi Experiment in a Services Setting” OM Review – Refereed: Volume 9, No. 3.Foster, S. Thomas Jr. Ph. D.: “Designing and Initiating A Taguchi Experiment in a Services Setting” OM Review – Refereed: Volume 9, No. 3. Taguchi, Genichi: Taguchi on Robust Technology Development: Bringing Quality Engineering Upstream; Asme Press, New York, 1993Taguchi, Genichi: Taguchi on Robust Technology Development: Bringing Quality Engineering Upstream; Asme Press, New York, 1993 Taguchi, Chowdhury, Taguchi: Robust Engineering: Learn how to boost quality while reducing costs and time to market; McGraw-Hill, New York, 2000Taguchi, Chowdhury, Taguchi: Robust Engineering: Learn how to boost quality while reducing costs and time to market; McGraw-Hill, New York, 2000

26. Recommended Reading: In addition to cited works:In addition to cited works: –Visit American Supply Institute (ASI) website at www.amsup.com www.amsup.com