Chapter w Quality and Environmental Cost Management of external failure costs allows management to more accurately level of resource spending for prevention appraisal the failure costs, we would expect management activities. specifically, with an increase in to nerease its investme n control costs. The Market Research Method Formal market research methods are used to sess the effect of poor qu y on sales and market sh Customer surveys and inter- views W members of a company's sales force can provide significant insights into the future of a company's hidden costs. Market research results can be used to project profit losses attributable to poor quality. The Taguchi Quality Loss Function zero definition assumes that hidden quality costs exist only for units that fall outside the upper and ower pecification limits. The Taguchi loss function assumes that any variation from the s target value of a quality characteristic causes hidden quality costs. Furthermore. the hidden quality costs increase qua as the actual value deviates from the target value. The Taguchi quality loss function, illustrated in Exhibit 14.2, can be described by the following equation: where k A proportionality constant dependent upon the organization's external failure cost structure y Actual value of quality characteristic T Target value of quality characteristic L Quality loss EXHIBIT 14.2 The Taguchi Quality Loss Function cification Value specification