How To Find The Hidden Factory In Your Organization

04/12/2304/12/23 Center for Organizational Excellence and EffectivCenter for Organizational Excellence and Effective Change- Dan Stoelbe Change- Dan Stoelb

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LEAN TRAININGLEAN TRAINING

The “Hidden Factory”The “Hidden Factory”


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The Hidden FactoryThe Hidden Factory

The Hidden Factory is where the largest The Hidden Factory is where the largest amount of money, time and resources are amount of money, time and resources are

spent that are considered “waste” .spent that are considered “waste” .

The money The money

Spent in the Hidden FactorySpent in the Hidden Factory

has the greatest negative impacthas the greatest negative impact

on the competitiveness and profitability of on the competitiveness and profitability of a company.a company.


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The “Hidden Factory”The “Hidden Factory” The TRUE “Cost of the The TRUE “Cost of the

Hidden Factory” is Hidden Factory” is usually underestimated usually underestimated in most companies.in most companies.

The “Hidden Factory” The “Hidden Factory” coexists with the coexists with the actual, visual factory. actual, visual factory.

The “Hidden Factory” is The “Hidden Factory” is where most of the where most of the profit-reducers and profit-reducers and

waste existwaste exist


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The “Hidden Factory” can The “Hidden Factory” can be seen to those who be seen to those who look for it. It exists right look for it. It exists right in front of our eyes. in front of our eyes.

Yet, most of us are blind Yet, most of us are blind to its existence and the to its existence and the “Hidden Factory” “Hidden Factory” continues to eat profits; continues to eat profits; increase process times; increase process times; create waste as we go create waste as we go about “business as about “business as usual”.usual”.


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The “Hidden Factory”The “Hidden Factory” Unless the “Hidden Factory” Unless the “Hidden Factory”

is exposed, it will continue to is exposed, it will continue to undermine your improvement undermine your improvement program success; program success;

Impact your ability to satisfy Impact your ability to satisfy your Customers (both internal your Customers (both internal and external Customers)and external Customers)

Reduce your Competitiveness.Reduce your Competitiveness.

Reduce your profits; Reduce your profits;

Prevent your Team from Prevent your Team from achieving the WORLD-CLASS achieving the WORLD-CLASS Performance results it could Performance results it could achieve.achieve.


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THE CHALLENGETHE CHALLENGE

FIND THE “HIDDEN FACTORY’ FIND THE “HIDDEN FACTORY’ IN YOUR ORGANIZATION; IN YOUR ORGANIZATION;

LEARN WHAT FEEDS IT; AND LEARN WHAT FEEDS IT; AND THEN THEN

GO BOLDLY AHEAD AND GO BOLDLY AHEAD AND ELIMINATE THE “HIDDEN ELIMINATE THE “HIDDEN FACTORY” ONE STEP AT A FACTORY” ONE STEP AT A TIME, TIME,

USING THE TOOLS AND USING THE TOOLS AND PHILOSOPHY OF LEAN PHILOSOPHY OF LEAN MANUFACTURING (Eliminate MANUFACTURING (Eliminate Waste)Waste)


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The amount of sales dollars that you have to have to “make The amount of sales dollars that you have to have to “make up” the money that you spend in the up” the money that you spend in the

““Hidden Factory”Hidden Factory”

is usually not easily attainable and results in your losing is usually not easily attainable and results in your losing money (profit) that impacts each and every one of your money (profit) that impacts each and every one of your

Customers; Team Members; Shareholders.Customers; Team Members; Shareholders.

It is better if you find ways not to spend money in the It is better if you find ways not to spend money in the “Hidden Factory” in the first place than it is to “make up” “Hidden Factory” in the first place than it is to “make up”

for the money you spend.for the money you spend.


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The Hidden FactoryThe Hidden Factory

For Example, For Example, a simple waste calculatora simple waste calculator that can that can be used to show how much in additional sales be used to show how much in additional sales dollars it would take to make up for the “waste” is dollars it would take to make up for the “waste” is a very simple but effective tool in showing people a very simple but effective tool in showing people the true cost of “waste”the true cost of “waste”

Cost of Waste (Actual or Estimated)--- $10,000Cost of Waste (Actual or Estimated)--- $10,000 Desired Profit Margin 5%= .05Desired Profit Margin 5%= .05

Divide the $10,000 by .05 = $200,000 in Divide the $10,000 by .05 = $200,000 in additional sales or cost cuts to make up for that additional sales or cost cuts to make up for that $10,000 in waste that was spent$10,000 in waste that was spent


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That is why you hear so much talk about “doing That is why you hear so much talk about “doing the basics well” and “eliminating waste”.the basics well” and “eliminating waste”.

That is why it is so important to follow That is why it is so important to follow standardized work and established procedures.standardized work and established procedures.

That is why everyone in an organization plays an That is why everyone in an organization plays an important part in the overall success in finding important part in the overall success in finding the “Hidden Factory” and stop feeding it with the “Hidden Factory” and stop feeding it with money that can be spent better in other ways. money that can be spent better in other ways.


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The cost of a defect that is not The cost of a defect that is not detected until a process is completed detected until a process is completed is often 20-50 times the cost of is often 20-50 times the cost of finding the defect at its earliest finding the defect at its earliest stage.stage.


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ExampleExample A missing nut on a sub-assembly part that is not caught A missing nut on a sub-assembly part that is not caught

before the part is put into a FG part.before the part is put into a FG part.

- Cost of missing nut= Pennies- Cost of missing nut= Pennies

- Cost to replace scrapped part due to 1 missing nut- - Cost to replace scrapped part due to 1 missing nut- Many, Many times greater Many, Many times greater

A “small” thing like 1 missing nut can often cause many, A “small” thing like 1 missing nut can often cause many, many more dollars than you planned for in your product many more dollars than you planned for in your product cost. cost.


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ExampleExampleExcessive number of parts are dropped throughout the day Excessive number of parts are dropped throughout the day

and placed in the “scrap bins”and placed in the “scrap bins”

Parts placed in the “scrap bins” are tossed away as scrap Parts placed in the “scrap bins” are tossed away as scrap without being inspected to determine if parts are still without being inspected to determine if parts are still usable.usable.

The cost of the individual part may be “small” but the The cost of the individual part may be “small” but the cumulative effect of hundreds of parts being scrapped daily cumulative effect of hundreds of parts being scrapped daily that are good parts actually costs thousands of $’s over the that are good parts actually costs thousands of $’s over the course of the yearcourse of the year


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ExampleExample

Every shift, you get 2-3 parts scrap for the same Every shift, you get 2-3 parts scrap for the same defect on the same cell(s) or part.defect on the same cell(s) or part.

You don’t search to find the “root cause” for the You don’t search to find the “root cause” for the repeating scrap but accept it “as just a few parts” repeating scrap but accept it “as just a few parts” of scrap.of scrap.

ResultResult

2-3 parts of scrap at every cell adds up to 2-3 parts of scrap at every cell adds up to thousands and thousands of $’s.thousands and thousands of $’s.


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ExampleExample An Operator is tired and wants to get home. An Operator is tired and wants to get home.

Instead of checking each part visually for the Instead of checking each part visually for the critical quality points, he doesn’t inspect the part critical quality points, he doesn’t inspect the part to “save time”.to “save time”.

ResultResult A defective part gets to your Customer resulting A defective part gets to your Customer resulting

in a Sort to be done and time to investigate the in a Sort to be done and time to investigate the problem that costs you wasted dollars that could problem that costs you wasted dollars that could have been saved if the procedures had been have been saved if the procedures had been followed.followed.


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ExampleExampleA Trainer doesn’t take the time to train a new A Trainer doesn’t take the time to train a new

person according to the training procedures.person according to the training procedures.

ResultResult

The new person creates scrap, rework and takes The new person creates scrap, rework and takes longer to become productive because you didn’t longer to become productive because you didn’t take the time to train the correctly from the start.take the time to train the correctly from the start.


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ExampleExample Instead of trying to negotiate and find comparable Instead of trying to negotiate and find comparable

products at a lower price, you continue to pay a products at a lower price, you continue to pay a higher price because it is “convenient’ or “you higher price because it is “convenient’ or “you have always bought from this company”.have always bought from this company”.

ResultResult

You spend thousands of dollars more in expenses You spend thousands of dollars more in expenses than we had tothan we had to


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ExampleExampleA Forklift Driver doesn’t do his start of shift checks on the A Forklift Driver doesn’t do his start of shift checks on the

forklift to “save time”forklift to “save time”

A forklift driver drives the forklift “fast” because he “is in a A forklift driver drives the forklift “fast” because he “is in a hurry”.hurry”.

Forklift repair expenses are excessive because the lifts are not Forklift repair expenses are excessive because the lifts are not properly or safely driven.properly or safely driven.

ResultResultExcessive dollars spent on forklift maintenance and repair Excessive dollars spent on forklift maintenance and repair


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The “Hidden Factory”The “Hidden Factory” ExampleExample

If each employee “wastes” just 5 minutes a day, this If each employee “wastes” just 5 minutes a day, this could add up to many $’s over the course of a year. could add up to many $’s over the course of a year.

This could be coming back 5 minutes late from a break; taking just “5 minutes This could be coming back 5 minutes late from a break; taking just “5 minutes longer than necessary to complete a job”. longer than necessary to complete a job”.

5 minutes is less than 1% of the total time in a normal 8 hour shift.5 minutes is less than 1% of the total time in a normal 8 hour shift.

This little 5 minutes adds up to a total of over $100,000 in money spent in the This little 5 minutes adds up to a total of over $100,000 in money spent in the “Hidden Factory” over the course of a year at FIA.“Hidden Factory” over the course of a year at FIA.

RESULTRESULT You need to make over $3,000,000 in additional sales You need to make over $3,000,000 in additional sales

in a year to make up for this “little 5 minutes that is in a year to make up for this “little 5 minutes that is wasted”wasted”


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ExampleExampleYou You have to work overtime in a department because you have to work overtime in a department because you

did not “control” the work during the regular shift hours. did not “control” the work during the regular shift hours. This could be a Weld Associate; a Parts Stocker; A Fork Lift This could be a Weld Associate; a Parts Stocker; A Fork Lift Driver; a Team Leader; or a Office Support Person.Driver; a Team Leader; or a Office Support Person.

ResultResult

You end up spending money on overtime for work that could You end up spending money on overtime for work that could have been performed during regular hours.have been performed during regular hours.


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The “Hidden FactoryThe “Hidden Factory

ExampleExample

You “rush” completing a project without getting input You “rush” completing a project without getting input from all departments who are impacted by the from all departments who are impacted by the project.project.

ResultResult

You end up going back and having to “redo” the You end up going back and having to “redo” the project which causes you to have to spend more project which causes you to have to spend more time, materials and money than you would have had time, materials and money than you would have had you planned and coordinated the project better.you planned and coordinated the project better.


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ExampleExample

You have a non-production process where we do not set some You have a non-production process where we do not set some “standard” or “expected level of performance” and you “standard” or “expected level of performance” and you use more people to do the work than would be necessary.use more people to do the work than would be necessary.

ResultResultYou pay more labor costs than would have been necessary You pay more labor costs than would have been necessary

because you did not monitor the work performance level.because you did not monitor the work performance level.


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An Employee does not follow procedures to An Employee does not follow procedures to properly wear PPE. The Employee receives properly wear PPE. The Employee receives a laceration to the arm and requires going a laceration to the arm and requires going to the hospital; getting stitches; and being to the hospital; getting stitches; and being put on light duty for 2 days.put on light duty for 2 days.

ResultResult$’s are spent to pay for the time away from $’s are spent to pay for the time away from

work; someone filling in for the employee work; someone filling in for the employee while at the hospital and when on light while at the hospital and when on light duty. This is waste.duty. This is waste.


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The bottom line of all these examples:The bottom line of all these examples:

There are hundreds of ways you can There are hundreds of ways you can find “waste” in every department; in every find “waste” in every department; in every process; in every action.process; in every action.

It is everyone’s responsibility on the It is everyone’s responsibility on the organizational Team to find the “Hidden organizational Team to find the “Hidden Factory” in their area; expose it; and Factory” in their area; expose it; and implement solutions that will eliminate the implement solutions that will eliminate the waste. waste.

How To Find The Hidden Factory In Your Organization

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