Hidden factories in organizational operations can cost the company financially and lead to wasted time and materials. They are not immediately apparent or tangible and can include dissatisfied customers. Failure to exercise tight process control can also lead to substandard or defective material.
The term hidden factory is used in organizational operations to describe the types of activities that can cost the company financially. It can also lead to situations where the organization will try harder than necessary, leading to a waste of time and raw materials. The ultimate effect of the hidden factory is to cause the company or organization to increase its final costs as a kind of compensatory measure, triggering a chain of nasty and unpleasant consequences. The hidden factory also sets itself apart from other items that can cost a company due to the fact that they are not immediately apparent or tangible.
An example of this can be seen in a situation where machinery used in the production process cannot be operated by a new employee. In such a situation, the employee’s inability to operate the machinery will have consequences including loss of labor and lost hours. During this, the company can keep a record of the entire hidden factory and add it to the final cost of the product. Assuming the product in question is a kitchen appliance and the company raises the price of the product to compensate for the hidden factory, this will cost the company even more.
In the situation described above, the company will still find more hidden factories in the form of dissatisfied customers who may rebel against the rising cost of kitchen appliances. Where this is the case, these customers may take their business elsewhere or launch a barrage of complaints against the move towards the company through its customer service. Customer rebellion is a hidden factory because it will affect the company’s bottom line. It will also tie up company resources, keeping customer service agents busy answering your calls when they could have been wasting their time with potential new customers.
The same applies when the company fails to exercise tight process control during the production process, leading to the production of substandard or defective material. For example, if a company that packs and sells fresh eggs fails to observe proper process control, and contaminated eggs are sent to market, this move will cost the company. In addition to having to deal with unhappy customers, recalls, possible government sanctions and the cost of destroying the eggs, you may also have to deal with lawsuits.
Asset Smart.
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