Definition of Hidden Factory, The:
The notion that much of the endeavour of the company that is not quality minded is directed inadvertently to creating waste and performing wasteful tasks – examples of wasteful activities are the production of non-conforming products and the holding of excessive stock. The hidden factory is the extra useful, positive output that would theoretically be possible if the energy directed at creating waste were released and directed instead at making good quality items.
In 1977, the quality guru Armand Feigenbaum estimated the endeavour within the hidden factory might be 15% to 40% of total company effort.
The notion of the hidden factory is bound up with the metric COPQ (cost of poor quality). The COPQ may be estimated by multiplying the number of defects per period of time by the average unit cost to fix a defect (labour and materials). Such a calculation however omits such costs as loss of goodwill and loss of competitiveness, and such other matters as warranty costs and even legal damages.« Back to Dictionary Index