If you think a 1 percent failure rate in manufacturing is not so bad, ask a breakfast cereal manufacturer what happens when 1 percent of the kiddie prizes are left out of cereal boxes. Shep Wild has already asked.
"Kids write letters in droves," he says. "And while 1 percent may not seem like much, when you turn out millions of boxes every day, you've got a lot of angry kids."
Mr. Wild thinks his company can help cereal markers cut down on the nasty letters. He is chairman of Object Recognition Systems Inc. (ORS), which develops and builds automated assembly line inspection equipment.
The heart of the $25,000-to-$30,000 system is a television camera and a small computer. every object of an assembly line gives off a recognizable pattern of signals -- recognizable to a computer, that is -- that helps the computer "see" the product in front of the camera and tell if something is wrong with it. When the pattern of signals given off by the object on the conveyor does not match that in the computer's memory, the defective product can be knocked off the conveyor by a high- powered blast of air or picked off by a mechanical arm, or the line can be stopped.
If a label is misprinted or crooked, or a numbered code is not printed properly, or a weld has not been made properly, or even if a cereal box hasn't gotten its prize before the cereal is poured in, the system will recognize the problem so corrections can be made. It can accomplish all this at a rate of 2 to 10 items a second.
Spurred by foreign competition and rapidly rising production costs, many US manufacturers have been placing increased emphasis on quality control. ORS is one of a number of companies that have sprung up or found this more interested marketplace.
"The demand for this is just beginning," said Laura Conigliaro, an analyst with Bache Halsey Stuart Shields. "In the past year or so, the demand for in-process quality control has grown substantially." In-process quality control means the product is inspected at each stage of the production process, not just when it is finished. For many products, especially highly technical and expensive electronics components, doing this inspection manually is becoming very costly.
"In the electronics industry, one-third of the manufacturing overhead is manual inspection costs," asserts John Artley, ORS president.
Another boost to the field, Ms. Conigliaro says, is the technology involed. "The technology is just coming into its own," she said. "Microprocessors are coming down in cost, the visual systems are coming down. It's just getting more economical."
For instance, Octek Inc., of Burlington, Mass. sells the noncomputer part of an inspection system -- a circuit board and image analyzer -- for about $6,000, notes Susan Solomon, Octek's marketing director. Additional components can be added to bring the price up to the $16,000-to-$20,000 range.
The ORS system, Mr. Artley says, can be "trained" to recognize a variety of labels and products. One large computer company is trying the ORS system to inspect word-processing keyboards. With more than 100 different keyboards, the company needs something that can be quickly switched to recognize a different board, Artley said.
In the mid-1970s, when ORS was developing the technology that led to today's system, there was not much interest in it, Artley recalls. "We just weren't getting a very positive response." Either companies felt such a high degree of inspection was unnecessary or they did not think it could be done economically.
Still, he says, "we made a business decision in 1976 that visual inspection would be important, despite the skepticism." This decision led to the acceleration of an unusual program of raising money for the company.
Unlike most new companies -- especially high-tech companies -- that turn to venture capitalists to provide money to help start the enterprise and see it through the early years, ORS has completely avoided venture capital. These institutions or groups of individuals have been a major reason for the growth of many new firms in recent years.
"But from 1974 to 1977, the amount of venture capital money around was very low," Artley says. "So we turned to private individuals." At meetings in lawyers' offices, private homes, university alumni clubs, and anywhere else Artley and Wild could get potential investors together, they pitched their company and "got a very positive response."
Those individuals first came up with $335,000, enough to permit the trial-and-error process of developing the system to continue. And when that "business decision" to go full steam ahead was made in 1976, these and other individuals came up with $3 million more needed to buy a production facility in Princeton, N.J., hire technical people and managers, and begin an extensive sales and promotion campaign. It was not until a few months ago that ORS went public, listing its stock on the over-the-counter market.
While the additional money will help, Ms. Conigliaro says, the groundwork ORS has been laying will help more. "The market needs educating to the importance of quality control," she says. "And they [ORS] are doing a good job at that."