2. Do you think that the company’s use of statistical quality control is sensible? H&H was established in Birmingham England, by two young entrepreneurs, Dave Philips and Chris Agnew, both experienced in the hardware trade. The business specialized in the ‘designer’

market for polished metal (brass or stainless steel) door handles, cupboard knobs, furniture fittings (mostly used in shop/office furniture) and hinges. The success of their company was based on H&H’s reputation for high-quality, unique designs of both traditional and modern products, many of which were selected and specified by architects for large and prestigious projects, such as the new office developments in London’s Docklands. Dave, the Chief Executive Officer, with responsibility for sales, believed that most of the orders from the construction companies were placed with H&H because they assumed they had no other choice once the H&H products had been specified. Larger companies would sometimes suggest to the architect that similar products were available at less than half the price. This advice was invariably ignored as the architect would be attracted by H&H’s designs and quality and would be reluctant to risk ‘spoiling’ the multi-million pound projects for the sake of saving a few thousand pounds. Dave outlines the characteristics of the changing marketplace:

‘During a recession in the construction industry, particularly in office building, we expanded our direct sales to large UK hardware retail companies, which now account for about 40 per cent of our sales value, but only about 15 per cent of our gross profit. This segment is much more price-sensitive, so we must be able to manufacture good-quality, simple and standard products at low costs comparable to those of our competitors. Some of the reduced costs have been achieved by using thinner and cheaper materials similar to those used in our competitors’

products. We have just received our first consignment of brass sheet from Poland with a saving of over 10 per cent in this case. We also had to reorganize to reduce our processing costs. Chris has done a great job of changing all production to modern batch methods. However, I am concerned that we are often late in delivering to our UK retail customers and this makes it difficult to keep good relationships and to get repeat orders. Fast delivery of relatively small quantities is required in the ‘retail “segment’, whereas the construction/contractors market allows very long production lead times. Dependable delivery is crucial to avoid completion delays, for which we have been held financially accountable on some occasions!’