How a pandemic exposed the full effects of engineering’s hidden factory phenomenon

A revolution has been taking place in engineering. As a result of Covid-19, companies have had to embrace digitalisation like never before, with remote working a shared ‘new normal’. But as well as making fundamental operational changes, the pandemic has also brought a phenomenon to the surface.

The ‘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.

The survey

We carried out a survey of the automotive engineering sector. The survey uncovered near-at-hand opportunities for OEMs and suppliers to save money and improve their prospects at a critical juncture in the economic fortunes of the car industry.

Our findings

An incredible amount of inefficiency.

Almost half – 43% – of all design engineering workflows between car manufacturers and suppliers take place outside of approved channels. As a consequence of working outside of the agreed PLM procotols, Hidden factory losses arise for a myriad of reasons – from design submissions using staledated versions of CAD software to engineers without the required training undertaking task assignments for which they are not sufficiently qualified. The Automotive Council estimate that £6b of business is conducted across the UK automotive supply chain, suggesting that in excess of £2.5b of value might be residing in the automotive industry’s Hidden factories.

Automotive sector 37% less productive than it could be.

With more design engineers working remotely, the potential for Hidden factories to expand to encompass more than 37% of automotive engineering productivity is increasing, but by increasing awareness of the problem beyond its low level of recognition 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 for the industry.

Nearly a third of the automotive industry is unaware of the leakage of workflows within engineering.

“At Majenta, we work with the UK’s three 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. 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.” Majenta Director, Manish Amlani.

Is this the opportunity to close hidden factories for good?

If there is one good thing that will come out of the pandemic, then it could well be improved efficiency across the board, entirely eradicating the ‘hidden factory’.

Stay tuned for part 3 of our Hidden Factories blog series, where we will further discuss why you should close your hidden factory and how you can do this.