QP www.qualityprogress.

com 50
CAREER CORNER BY JACK B. REVELLE
Out of Hiding
Uncover the true costs of not getting it right the rst time
SOMETIME IN the mid-1980s, while I
was the senior statistician for a manufac-
turing division of a major aerospace rm,
I shared the concept of the hidden factory
with a statistical quality control (SQC)
training class composed entirely of senior
and middle management.
The hidden factory is the portion of an
organizations total capacity that exists to
rework or touch-up unsatisfactory parts,
to replace products recalled from the eld,
to retest and re-inspect rejected units,
and to store unsatisfactory and rejected
goods until they can be reworked, touched
up, retested, re-inspected or disposed of.
Figures 1 and 2 depict two views of the
hidden factory. This concept is not limited
to factories. It also applies to nonmanu-
facturing venues, such as warehouses,
libraries, hospitals, ofces and a variety of
other service-oriented operations.
In denial
Based on available data, it has been
estimated that the hidden factory can be
anywhere from 15 to 40% of the produc-
tive capacity of an enterprise. There is no
better way to improve productivity than to
convert the hidden factory to productive
use. Enterprisewide total quality manage-
ment or lean Six Sigma programs provide
the most practical ways to accomplish this
objective.
When I noted the 15 to 40% hidden
factory statistic with the class, one of the
class members vociferously denied that
such a gure was possible. To emphasize
the strength of his denial, he told me
during the class that he was going to have
an audit conducted of his engineering divi-
sion to determine the proportion of the
resources and facilities under his control
that was the hidden factory. He acknowl-
edged it might be as high as 5% or so, but
it would certainly be no more than that.
About two weeks after the class, I was
invited to attend a senior staff meeting
for the organization where the member
from my SQC class worked as a division
manager; I wasnt told why. The meeting
included the organizations group presi-
dent, vice presidents, directors and senior
managers. I found out soon enough why
Id been invited: The member from my
class was the rst speaker on the agenda.
He explained to everyone in the confer-
ence room what I had stated about the ex-
Hidden factory consumes
up to 40% of productive capacity / FIGURE 1
The hidden factory / FIGURE 2
Up to 40%
rework
Suppliers
Customers
Manufacturing
(Visible factory)
Hidden
factory
March 2013 QP 51
tent of the negative impact of the hidden
factory. He then described his immediate
disbelief and his vocal reaction in my class
followed by the audit of his engineering
division.
Finally, he admitted to his colleagues
attending this staff meeting the surprising
(to him) results of the audit. Thirty-three
percent of the personnel, resources, equip-
ment, material and facilities under his
management were regularly committed to
doing things right at a time other than the
rst timethe hidden factory. Clearly, this
was a major admission in the presence of
his peers.
What followed was more than I could
have reasonably hoped for. The group
presidentwithout any comment from me
or anyone elsesimply but rmly said he
expected everyone in the room to conduct
a hidden factory audit and take immediate
action to substantially reduce their hidden
factories. He also informed the group
that he expected a report from each of
them that included their before and after
hidden factory statistics for the next three
months. To this day, I still clearly recall
this groundbreaking event.
After reading this story, consider: What
proportion of your business is hidden fac-
tory? And what are you going to do about
it? Do you know how and where to obtain
the necessary information to establish this
proportion? In fact, do you know if the
necessary information is even available?
If its not, do you know how to derive the
raw data to create it? QP
JACK B. REVELLE is a consulting
statistician at ReVelle Solutions LLC in
Santa Ana, CA. He earned a doctor-
ate in industrial engineering and
management from Oklahoma State
University in Stillwater. ReVelle is the
author of several books, including
Home Builders Guide to Continuous
Improvement (CRC Press, 2010). ReVelle is an ASQ fellow and
a 2012 recipient of the ASQ Shainin Medal.
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There is no better way to improve
productivity than to convert the
hidden factory to productive use.