We always had customer-complaint forms. You'd fill 'em out, sign 'em, and send 'em to somebody. But what did we learn from them? They were simply filed away," says Dave Franceschi, quality-support manager of Granite Rock, a supplier of building and construction materials, based in Watsonville, Calif. "The result was that we had no way of keeping the problem from happening again."

Today, every complaint generates a product-service-discrepancy (PSD) report, a copy of which lands on Franceschi's desk. Over time, he can chart exactly where problems lie and how much each one costs the company.

The critical line on the PSD reports is the one marked "root-cause analysis." In the past, a bad batch of asphalt might be ascribed to "dirty rock," a term that refers to an aggregate with too many fine particles. Today, Franceschi won't accept a PSD unless it offers a true explanation, such as "faulty screen at the quarry." The explanation alone usually shows what must be done to correct the problem.