Hidden Factory

The Hidden Factory refers to the activities or activities that reduce the quality or efficiency of a manufacturing process or business process. It is not known by managers or other people who are trying to improve the process. In Lean Six Sigma is focused on finding the “hidden factory” activities and eliminating their root causes.

In Lean Six Sigma the Hidden Factory refers to activities within an operation or standard operating procedures (SOP). Hidden Factories can be workarounds, rework, or any one of the seven wastes I will discuss below. Hidden factories are common in organizations. Understanding how to identify and “see” hidden factories within an organization is crucial. It can drain the bottom line, top line, employee morale, shareholders, and most importantly the customer.

One of the most important tests for any activity is: “If the customer knew all the details of process x,” In other words, suppose that substantial rework was necessary to make a widget. If the rework cost was included in the price of 1 widget, would the customer pay for the firm’s defects? Would the customer pay for inefficiencies within the company?

What’s the Process?

The Hidden Factory process is a systematic activity that involves smaller activities that lead to a final product or service. The process may take up space, time, and resources. You can categorize all processes into these categories: Value-added; Non-value-added but necessary; and Non-value-added.

The Customer’s View:

  1. Value-added is the final step of the process that adds value to the product and the customer.
  2. Non-Value-Added : This step doesn’t add form, function or aid in the final goods manufacturing.
  3. Non-Value-Added-But-Necessary: This step does not add value, but is a necessary step in the final value-added product.

(2) & (3) create waste naturally, which can be divided into 7 types:

  1. Overproduction: Producing more than you need, faster than necessary, or earlier than required.
  2. Wait-time: A period of inactivity that occurs when codependent events are not synchronized.
  3. Transport: Any movement of material that is not directly supporting immediate production.
  4. Processing: A wasteful effort in production or communication that adds no value to the product or service.
  5. Inventory: Any excess supply that exceeds the process or demand needs.
  6. Motion is any movement of people that does not add value to the product/service.
  7. Defect: To repair or rework a product or service in order to meet customer needs.

Process Cycle Efficiency

For the hidden factory, a metric is used to determine how valuable a process is. There are a few things you need to know:

  1. The process can be mapped.
  2. Identify the Value-added, non-value-added, and necessary steps.
  3. 2. Stratify your map based on the items in #2
  4. You can also add a time dimension to each step.

After you’ve completed steps 1 through 4, you can calculate the percentage of value-added. A cycle time is the time taken to complete the entire process. Divide the cycle time of the process by the value-added time to determine the Process Cycle Efficiency.

How do you identify a hidden factory?

Hidden factories can be identified when inventory or WIP stops growing because the system is unable to keep up with demand. This happens in famous clips like the one from I Love Lucy. Lucy and Ethel are unable to wrap the chocolate fast enough and have to deal with more chocolate as it arrives.