Surprising losses in so-called ‘hidden factories’

The phenomenon of a ‘hidden factory’ occurs when the formal processes between OEMs and suppliers break down and engineers revert to informal workflows that sit outside of approved product lifecycle management (PLM) processes. The quantity, quality and efficacy of interactions between OEM and supplier that take place in this ‘hidden factory’ cannot be measured, accounted for, or managed – and are easily lost altogether in the event that staff move jobs or are furloughed.

The survey revealed that almost half – some 43% – of all design engineering workflows between car manufacturers and suppliers take place outside of approved channels. As a consequence, ‘Hidden Factory’ losses arise for a myriad of reasons – from design submissions using out-dated versions of CAD software to engineers without the required training undertaking assignments for which they are not sufficiently qualified, or IP breaches due to file sharing using non-secure data transfer methods.

These ‘hidden factory’ outcomes feed into losses that have become an accepted convention in automotive engineering, including programme delays, increased re-work and warranty claims, Just-In-Time backlogs and the need for project re-planning. Together, the losses add to £billions in reduced profitability and productivity.

“At Majenta, we work with the UK’s largest car manufacturers, plenty of smaller OEMs and hundreds of tier 1, 2 and 3 suppliers. For more than twenty years, we’ve known anecdotally that this interface between OEM and supplier is the critical juncture and too much design engineering activity leaks out from the PLM process at this point, creating an unseen, unmeasured and largely inefficient universe of activity,” said Majenta Director, Manish Amlani. “However, this is the first time we have quantified the scale of the ‘Hidden Factory’ problem and even we are surprised how pervasive it is.”

With more design engineers working remotely, the potential for ‘hidden factories’ to expand to encompass more than 37% of automotive engineering productivity has increased, but by raising awareness of the problem beyond its low level – which the survey audited at just 30% of the sector – the scope to close down informal working practices and recoup a productivity and efficiency dividend could not come at a better time.

“OEMs and suppliers alike are having to deal with unprecedented market volatility and are searching for solutions to reduce costs. The way to close down these ‘hidden factories’ is for both to become more digitally integrated. Majenta offers a cloud-based hub that allows OEMs and suppliers to collaborate in real-time on projects through a single platform. Not only does this have the potential to offer a way to save money but also improve supplier integration and all the benefits that come with it, from reduced design failures and warranty costs to enhanced critical path alignment across the very complex design engineering supply chain,” Amlani concluded.