This article describes the virtual manufacturing environment Watfactory (freely available at http://services03.student.math.uwaterloo.ca:8080/~stat435/login.htm) and discusses its use in teaching process improvement. Watfactory provides a rich and realistic simulation of a manufacturing process and is accessed through a website requiring no software other than a Web browser. With Watfactory, students select, plan, and analyze the data from a sequence of empirical investigations of many different types, with the ultimate goal of reducing variation in the process output. We have found that using Watfactory addresses many shortcomings in traditional teaching methods for both undergraduate and industrial short courses.