Smart Tech Doesn’t End the Hidden Factory

The manufacturing inefficiencies associated with Six Sigma’s “hidden factory” are not eliminated by advanced technology.

Can shiny new plant technology solve the underlying system inefficiencies known as the “hidden factory?” The Six Sigma Institute identifies the hidden valley as a set of activities in the manufacturing process that result in reduction of quality or efficiency and is not known to managers or others seeking to improve the process.”

MIT, Hidden factory, advanced manufacturing, IIoT

Most of us know these problems as workarounds, lost orders, late delivery, excess inventory, long set-ups, and lost customer loyalty. This collective operating dysfunction works as an undercurrent to the improved efficiencies that come from advanced manufacturing technology. Added together, these inefficiencies can decrease optimal plant output by 30%.

The Insidious Hidden Factory

In the race to implement new manufacturing technologies and systems, such as the Industrial Internet of Things, it is often forgotten that factories and operations already have systems in place—and the inner workings of these systems tend to actively resist any change forced upon them. So says John Carrier, senior lecturer of system dynamics at the MIT Sloan School of Management. He notes that the "hidden factory" that results from counterproductive and unpredictable old and new technologies will, over time, results in an unknown “process" that delivers defect-laden products behind schedule.

Advanced plant technology used to be the bailiwick of specialized plants. Now, smart technology and it’s promise of increased efficiency is affordable to even the smallest factories. “What has happened, is the cost to wire things up and communicate has dropped three orders of magnitude. We’ve been connecting equipment in chemical and nuclear plants for a long time, and now that the barrier of cost has been removed, most plants are adding technology,” Carrier told Design News. “So, what happens after cost drops? You get everything talking to each other and you find your current system is a great barrier.”

Technology Won’t Cure a Bad System

While new technology won’t necessarily eliminate underlying inefficiencies in plant systems, it can bring them to light. “When you wire things up and get the data, you’re going to learn things you didn’t want to know,” said Carrier. “The technology is new, but systems never change. All the difficulties people have had from building the pyramids to installing SAP are the same. As long as you have more than five people and you’re doing tasks in sequence, you’re going to have problems.”

The most direct way to discover hidden and costly problems is to measure everything. New tech can help with measurement. “The first benefit of connectivity is visibility into how your system is run. You’ll start measuring what’s going wrong. That’s a huge factor in revealing the hidden factory,” said Carrier. “But if you’re not careful in how you implement the new technology, the old system will reject it.”

Even with measurement, hidden-factory excesses can stay stubbornly in place. “If you can’t measure it, you can ‘t get rid of it. Yet the measurements have a lot of noise in them,” said Carrier. “You can start by looking at time-stamp data. You can’t hide time. How long does it take to get the product out of the plant? You may find the thing stays in there 10 times as long as it should.”

The Hidden Factory Will Always Return

Trying to apply best practices to address inefficiencies can also fail to deliver solutions. “I hear this comment all the time: ‘The reason we’re not doing the best practices in SAP is because that’s not how our system runs,’” said Carrier. “SAP has built-in ways to run a business, but many companies won’t run your business is that way. So, they bring in large system integrators to write software so they can keep running the way they always have.”

Getting rid of the hidden factory is always temporary. It’s human nature to slide toward workarounds and idiosyncratic processes. Reviewing processes is necessary as things change. “When you get rid of the dysfunction you start to run well. Then, as you get new customers and put more demand on the system, you get the hidden factory again,” said Carrier. “Toyota does a fantastic job of avoiding the hidden factory, but every time they introduce a new product and add new customers, they will have to get rid of the hidden factory again.”



In order to make sure the hidden factory doesn’t undermine the advantages of new technology, Carrier says that executives need to decode cultural and workforce factors prior to making an investment in new tech. “There is an overemphasis on visioning at the expense of fully understanding existing systems and the people who must use the technology,” said Carrier. 

Carrier will co-lead a discussion on the topic of overcoming hidden-factory problems in the program, Implementing Industry 4.0: Leading Change in Manufacturing & Operations, which will be held three times over the coming few months.

Rob Spiegel has covered automation and control for 17 years, 15 of them for Design News. Other topics he has covered include supply chain technology, alternative energy, and cyber security. For 10 years, he was owner and publisher of the food magazine Chile Pepper.

Image courtesy of Julian Kalac

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