The term Cost Function plays an important role in the fields of Artificial Intelligence, Big Data and Smart Data, as well as Industry and Industry 4.0. A Cost Function – often referred to as a Kostenfunktion in German – is a type of calculation formula used in many digital applications to measure the difference between a desired and an actual outcome.
You can think of the cost function like a measuring tape, which checks how „good“ or „bad“ a computer or machine model is performing. The goal is to keep these costs as low as possible, so that machines, robots, or AI models work as accurately and efficiently as possible.
A simple example from industrial manufacturing: a robot is supposed to fill exactly 100 grams of powder. The cost function now measures how far the actual weight of each filling deviates from the ideal value of 100 grams. The greater the deviation, the higher the „cost“. The robot automatically adjusts its settings to reduce the cost function – i.e. the error.
Cost functions therefore help companies to optimise processes, minimise errors and thus save costs. They are a central tool for modern, data-driven technologies.
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