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In the sixth chapter of their book Six Sigma:  The Breakthrough Management Strategy Revolutionizing the World’s Top Corporations, the authors Ikel Harry, Ph.D. and Richard Schroeder bring up a fascinating concept of the “Hidden Factory.”

What is a factory?  It is a place where things are made.   Theoretically, the materials and staff in the factory should all be engaging in processes which either directly involve manufacturing or indirectly support those efforts.    However, the problem with a company that is producing products and services at quality levels of four Sigma or lower is that a lot of its time and attention are focused on detection and correction of defects.   The correction may involve reworking those products that contain defects, or it may involve scrapping those products if they are beyond repair.   Those processes in a factory that detect and correct mistakes made during the originally conceived manufacturing process are termed “the hidden factory.”   They are called “hidden” since these processes for correcting mistakes are not part of the original plan for the factory.

Whether planned for or not, the costs associated with these processes, whether they cover the extra material and labor costs involved, end up hurting the bottom line of the company.   Those companies that base their financial strategy on the profitability of the factory will find that those strategic targets may end up not being met because of the unanticipated costs created by the hidden factory.

So it should be the goal of every company that runs a factory where the processes are the level of four Sigma or lower to unmask the hidden factory.   Unmasking it is the first stage in dismantling it, and how to unmask it is the subject of the next post.

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