Special Report

al manager and decided that TQC was the way to turn the place around. Sasaoka installed a pilot program on one line in 1976 and, notes Walter, "immediately reduced the defect rate by several orders of magnitude."

Gradually the statistical quality approach was expanded into all levels of manufacturing, plus research and development, administration, and even sales. And in 1982 YHP won the Deming Prize, Japan's most coveted industrial award. A greater reward for HP was the unit's jump from dead last to the head of the profitability list. And YHP stayed there for five years running until last year, when the strength of the yen pushed it down a notch.

Comparing 1985 with 1975, YHP's manufacturing costs plummeted 42% and product defects shrunk 79%. Meanwhile, revenues per employee climbed 120%, Imarket share shot up 193%, and profits soared 244%. Equally important, notes Walter, applying TQC to the R&D process trimmed the time it takes to get new products to market by a third. "Since half of HP's sales this year come from products new in the past three years," he adds, "you can see why reducing those cycles is so important."

RUDE MESSAGE. Whole industries are now taking up the quality challenge. Detroit and Silicon Val ley, both of which suf fered severe market share losses due to inferior quality, are heavily committed, as are the textile, steel, and major appliance industries. The auto makers were rudely roused in 1980 by the discovery that the quality of Japanese cars had pulled

ahead by a wide margin and that U.S. drivers were not buying imports just because they cost less. So the Big Three launched crash catch-up efforts that have narrowed the gap significantly, although it still hasn't been closed (page 138).

Similarly, the U. S. semiconductor companies paid dearly for allowing Japanese rivals to wrest the lead in quality. That crucial wedge was exploited by Japan's chipmakers in attacking the U.S. market for computer-memory chips in the late 1970s. Today the Japanese dominate memory chip sales, both in the U.S. and worldwide. While U. S. producers say their quality is now competitive with Japan's, the bulk of the memory busi ness seems lost forever.

For the remnants of America's onceprosperous steel and textile industries,

134 BUSINESS WEEK/JUNE 8, 1987

quality is nothing less than survival. "Of all the industries that are responding to the quality need, the steel industry was probably under the most pressure to deliver in the short term or be eliminated," says Peter J. Trepanier, vice-president for quality for Armeo Inc. At his company's Middletown (Ohio) Works, more stress on SPC and greater worker responsibility have yielded a 25% improvement in manufacturing costs, saving $2.5 million a month. Since Inland Steel Co. hired a platoon of consultants from Nippon Steel Corp. in 1985, the company has slashed its reject rate of flat-rolled steel in half. And Bethlehem Steel Corp.'s

THE JAPANESE EDGE
IN MANUFACTURING

As producte become more complex the Japa
are more efficient

shipments to Ford Motor Co. now get turned back only 1% of the time, compared with 8% in the early 1980s.

To win back customers in the apparel market, America's import-battered textile companies are mounting a just-intime delivery campaign that hinges on guaranteed quality. Swift Textiles Inc. each morning ships just enough denim for a day's production at the nearby Levi Strauss & Co. plant in Valdosta, Ga. With Swift certifying the quality of the denim, Levi has closed its warehouse and quality-testing lab. "The system will not allow us any mistakes," says Swift Vice-President Donald L. Massey. The gamble seems to be paying off. To fill new orders, Swift recently announced a $52.3 million, three-year expansion that will boost denim capacity 50% and add 300 jobs.

To avoid having to play catch-up, the major-appliance makers decided to slam the door before Japanese competitors could get their toes in the U. S. market. They beefed up quality and reliability with a range of new products that seem to have left little maneuvering room for newcomers (page 139).

A PUSHOVER. Other companies would do well to heed the example of the appli ance industry, warns Armand V. Feigenbaum, president of General Systems Co. and another guiding light in the push for quality. That's because offshore producers now regard virtually every U. S. market as a pushover for better-quality products. The attitude of foreign execu tives, he says, is that "you can't help but succeed in the U. S. market today." Moreover, pressures from overseas will only intensify, adds Du Pont's Snee. "The Pacific Rim countries are now doing to the Japanese what the Japanese are doing to us," he explains, and this is bound to spur the Japanese to still higher levels of quality.

Improved quality doesn't come quickly, nor is it painless. It takes at least a couple of years just to get into the swing of things and train managers and then workers to be comfortable with statistical analysis tools. The process has to start at the very top and filter down, because without solid evidence of support from the executive suite, workers quickly tag the program as yet another management sham. "Quality is not evangelism, suggestion boxes, or sloganism-it's a way of life," declares Feigenbaum, who was manager of quality control at General Electric Co. before he founded his Pittsfield (Mass.) consulting company in 1969.

The most resistance usually comes from the middle-manager, and supervisory levels. For many of these people, management by quality seems a threat to their authority-if not their jobs. Shop-floor workers are usually eager to assume responsibility for the quality of their work. But for middle managers, says Box of Wisconsin's QPIC, "it's a different game from the one that they learned." They must function less like bosses and more like football coaches, relying on powers of persuasion rather than "do-this" directives.

HP's Walter admits that despite clear signals from President John Young that quality is a top priority, the quality thrust hasn't gone without hitches.

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