Introduction

Concept of an Operations Appraisal

There is a growing recognition of the need for a review and appraisal of various aspects of a manufacturer’s business, in addition to the audit of financial records and controls. Because of the importance of this kind of appraisal and the degree to which executives rely on independent findings and recommendations as the basis for important decision making, this guide has been published to provide guidelines for the conduct of such engagements.

The guidelines are not meant to be rigid procedures or approaches to be followed. Obviously, the suggestions and guidelines contained in the guide will not all apply to each company. Business needs are too wide-ranging and diverse to compile a universally applicable guide. Therefore, the appraiser must use his or her own judgment and background to modify the approaches, evaluate the findings, and provide direction to the analysis, dependent upon the special circumstances surrounding each situation. The Operations Appraisal Checklist is constructed to remind the consultant of the points that should be covered in a thorough review of management practices. The consultant’s own experience in the area must be used to weigh the significance of these points in a given situation.

In addition, it is intended that the Guide to Operations Appraisal will be utilized as an effective tool for the training of new employees in the content and nature of Operations Appraisal, and to provide guidance to the consultants who will be performing specific phases of the assignments.

Definition of Operations Appraisal
The Operations Appraisal refers to a review and analysis of a company’s operations, controls, systems, policies, management methods, and corporate results to determine their effectiveness and to point out areas for improvement. Although an Operations Appraisal may be done in parts, the total coverage would include an appraisal of organization, overall results, policies, objectives, planning techniques, direction and control methods, and the effectiveness of various individual departments such as finance, accounting, personnel, product planning, product engineering, marketing, merchandising, distribution, data processing, production control, inventory control, purchasing, material handling, warehousing, industrial engineering, quality control, maintenance, and tax affairs.

The full resolution of a problem takes a number of steps, the most important are: (1) identification of the symptoms indicating a problem (2) analysis and investigation to determine and define the problem (3) determine an appropriate solution and (4) action to correct the problem.

The Guide to Operations Appraisal is designed to do steps (1), (2) and (3), identify the symptoms, diagnose the problems, and determine the solution. Utilizing the output from step (2), the consultant will develop the appropriate procedures needed to correct the problem. The working-out of specific changes, step (4), would be done either by the executives or by an independent consultant. The diagnosis must consider the relative importance of the various elements of the business and the relationship of the findings to them, in order to pinpoint the main problems which can have a serious effect on current and future results.