Financial diligence tells you what a plant has earned. Operational diligence tells you whether it can deliver the plan. This checklist covers the questions to ask on a plant visit, the data to request beforehand, and the red flags that should change the model or the 100-day plan.
Before the visit: the data request
- Weekly shipments in units and revenue, 12–24 months
- Open orders with promised and current dates
- Routings and standard times for the main product families
- Work in process by step and age
- Inventory by category and location
- On-time in full by customer, with the measure’s definition
- Overtime hours and premium freight by month
- Downtime and scrap at the main work centres
Ask for the reports the plant already runs. How long they take to arrive, and how well they agree with each other, is itself a finding.
On the visit: six areas to check
Capacity and pace
- What has the plant actually shipped per week over the last 12 months, against what the model assumes?
- Which point sets the pace of the line, and how many hours a day does it really run?
- How much time at that point is lost to changeovers, rework, waiting for material and breakdowns?
- Is the growth case built on new equipment, or on output the current line has never shown?
Red flag: Output in the model above anything the plant has ever shipped, with no clear answer to where the extra will come from.
Flow, work in process and lead time
- How much work is started but not finished, and how old is the oldest?
- How does quoted lead time compare with actual lead time, order by order?
- Is work released when a machine is free, or at the pace the line can finish it?
Red flag: Work in process and lead times growing while management says the plant is at capacity.
Delivery
- On-time in full by customer and by product family, measured against the first promised date.
- How many orders are expedited each week, and who decides what runs next?
- How much overtime and premium freight is spent to hold today’s delivery performance?
Red flag: On-time delivery that depends on overtime, premium freight or one person who knows the floor.
Inventory and working capital
- Where does inventory sit: raw material, in front of which steps, finished goods?
- Inventory turns by category, and how they have moved over three years.
- Is stock held on purpose where work waits, or spread everywhere because the plan is not trusted?
Red flag: Rising inventory and falling on-time delivery at the same time.
The schedule against reality
- Does the floor follow the business system’s schedule, or a whiteboard and a spreadsheet next to it?
- How often is the schedule changed during a shift, and why?
- Are routings and standard times in the system close to what the floor actually does?
Red flag: A schedule the floor works around, with priorities set by whoever calls loudest.
People and routine
- Is there a short daily meeting that acts on what is at risk today?
- Who could run the schedule if the scheduler left tomorrow?
- Which roles are hardest to fill, and how much output depends on them?
Red flag: Delivery that rests on a few people and no written routine.
Walk the floor backwards
Start at shipping and walk upstream against the flow. Note where work waits, how much, and how old it is. The place where work always waits, and where an hour lost is an hour less shipped, is usually where the line’s pace is really set. More on this in spotting a capacity constraint in operational due diligence.
What it means for the deal
- For the model: output, lead time, delivery and inventory assumptions the floor supports, and the ones it doesn’t.
- For capital: what can be recovered at the pacing point before new equipment is bought.
- For the first 100 days: where to pace the line, where to hold buffer inventory, and what to measure from day one.
Want a second pair of eyes on the plant?
Our plant capacity check is a fixed-scope, fixed-fee review timed to your deal calendar: what the plant can really make, what holds it back, and a first 100-day outline. After close, we implement it with the plant team: lean and Theory of Constraints implementation, measured in units out. More for private equity operating teams.
FAQ
What is operational due diligence in manufacturing?
A review of how a plant really runs: what it can make, how work flows, how reliably it delivers and how much cash sits on the floor. It tests whether the operating assumptions in the investment case hold on the shop floor.
How long does a plant review take?
It depends on access and deal timing. A focused review of capacity and flow can be scoped to fit the deal calendar, starting from a data request and a floor walk.
What data should we request before a plant visit?
Weekly shipments for 12–24 months, open orders with promised dates, routings, work in process by step, inventory by category, on-time delivery with its definition, and overtime and downtime records.
What are the biggest red flags?
A growth case above anything the plant has shipped, work in process and lead times growing while the plant is said to be full, and delivery that depends on overtime or one key person.
Can capacity be recovered without capital spend?
Often. Time lost at the point that sets the line’s pace, to changeovers, rework and waiting, can usually be won back before new equipment is needed. That is the first thing to quantify.
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