The application of on-line quality engineering methods in manufacturing processesis very important since the results directly contribute to the economic gain of a company. However, few case studies have been published. This study discusses the concept of on-line quality engineering concept using the results of collected samples which were taken at certain intervals, followed by the measurement of the samples. This study was conducted with collaboration from several mechanical component parts manufacturing companies. In the study, the following issues were discussed: (1)When a component parts manufactures estimates the functional limit, △0 , and the average loss,A0, in the Loss Function, the results may not reffect the actual situation. lt is important to well understand the concept of the Loss Function such as the functional limit. (2)Sometimes the existing tolerance is looser than the one determined from the functional limit, △0 ,and the average loss, A0, resulting in a wrong tolerance. For this purpose, the standards for the determination of appropriate tolerances are useful. (3)Discussion of appropriate control systems for measurement. (4)How to minimize the total loss due to on-line quality engineering.