7 Questions to Ask on a Factory Tour

A factory exists for one reason: to produce high-quality products as efficiently as possible. Any activity that doesn’t add value to a product is waste, which costs money and increases product lead times.

Private Equity investors know waste elimination is one of the most effective ways to increase profitability and reduce risk in any business. Yet identifying the source of waste can be tricky; it can come from many different places—including producing more than needed, not shipping on time, unnecessary movement of the product, inappropriate or additional processing, unnecessary inventory, and defects requiring rework or warranty costs. Not only do these issues waste precious resources, but also many of them can result in longer term business risks, including improper allocation of capital, excess working capital, quality issues, and excess labor, resulting poor financial performance.

Assessing a plant to pinpoint sources of waste and risks in a factory is more science than art. When mulling over an investment decision, click here to view seven questions private equity professionals should ask when touring the factory floor.