The Ins & Outs of Operational Audits

Written by:  Nick Liberto P.E., Powder Coating Consultants, Division of Ninan, Inc.

When someone tells you you’re about to be audited, the first thing that goes through Your mind is that the IRS must have caught that mistake you made on Your tax return. Maybe it wasn’t such a good idea to declare your cat as a dependent after all. But not all audits are bad things. If operational audits are performed by competent persons in a comprehensive fashion, they can root out areas where you can improve your process and become more profitable and efficient.

Twenty plus years ago when I started my business, operational audits were unheard of in the powder coating industry. We were the first company to use the term and offer the service in this industry (and maybe the entire finishing industry). The concept of auditing a production process was foreign to most business owners, although they understood that such a service could be beneficial if they truly realized productivity and efficiency gains. In fact, we were so successful in establishing the operational audit market, that everyone starting offering the service. There were powder coating suppliers, equipment companies, pretreatment chemical suppliers, equipment distributers, colleges and universities, state and federal government programs, electric utility companies, gas utility companies… you name it, everyone was offering the service. It seemed that if you had a clipboard, you were in the operational audit business! Over time, most of these organizations stopped doing audits, as they didn’t perform the service to the complete satisfaction of the customer, or the cost for performing the service outpaced the benefit to either the audit company or the client. This isn’t the case with us. Operational audits are still a significant part of our business.

What constitutes a compete operational audit?
An audit should evaluate every piece of equipment individually and the coating process in total to ensure all areas of improvement are exposed and recorded. Furthermore, an audit should evaluate how efficiently the coating process is integrated into the overall manufacturing process at the subject facility. Beyond that, the operators, line management, engineering support, maintenance activities, spare part inventory, consumable material storage, environmental issues, and safety issues must be evaluated in a comprehensive operational audit. National code violations are brought to the attention of the client along with recommendations for corrective action.

Material handling equipment (conveyors, carts, racks, hangers, and so on) must be evaluated for stability, suitability for purpose, structural integrity, grounding, sprayability, part drainage, ease of use, and product density to ensure productivity goals. Pretreatment systems must be evaluated to ensure they prepare the products to the stated performance requirements of the coating. Spray and recovery equipment must be evaluated for safety, efficiency, productivity, and efficacy. Cure equipment must be checked to determine that all coated products achieve the required coating performance objectives in a safe and efficient manner. The entire coating process must be evaluated for how wen it achieves the intended production goals with a manageable defect rate in a productive, cost efficient, safe, and environmentally correct manner. The operator’s level of proficiency needs to be judged over the length of the audit. Are their activities driven by accurate knowledge of the process or by tribal knowledge grounded in folklore? Are the suppliers providing the level of service necessary to support the operation and the products they sell the customer?

This level of effort requires a lot of work and observation. Our experience has determined that even the simplest systems can take up to 3 days to perform a complete audit, while large, more complex systems require up to 5 days of effort on site to collect the required data.

What tools are required to perform an operational audit?
Our company ships a custom-built “footlocker-sized” test instrument case containing all the tools necessary to perform a complete operational audit. Our associates use these tools to measure various performance parameters such as part ground, chemical ranges, operating temperatures, coating characteristics, environmental conditions, electrostatic performance, and airflow just to mention a few. This test equipment is constantly upgraded and improved to ensure that all the accuracy certifications are in compliance so that our customers receive accurate data.

However, having all the right tools isn’t enough security that you’ll end up with good audit information. You must have the knowledge on how to use these tools properly to obtain meaningful data. Furthermore, you must take numerous readings over the entire audit period to completely judge the operation and provide useful information to the customer. For instance, just because one oven profile on the largest part shows full cure, doesn’t mean that the lighter parts are not overcured. Taking the temperature and relative humidity readings in the morning doesn’t tell you what the conditions are later in the day or if the air conditioning system is keeping pace with the heat load. You have to take numerous readings at different times to judge all the “typical” operating conditions at a particular facility.

The most important tool is skilled observation. A practiced eye can tell if an operator is really executing their responsibilities properly or is just putting on a show for the observer. Examining process records can reveal if the process is in control most of the time. Reviewing product defects or quality documentation will determine how effective the operation is at achieving the desired quality and where the most critical process improvements are required. All this takes experience and objectivity, qualities not always found at some auditing firms.

What should an operational audit report look like?
An operational audit report should describe the problems that were found during the audit, the corrective measures taken during the visit, what safety issues need to be addressed, and the level of training of the operators. Recommended corrective action must be clearly communicated. The last point is often missing from audit reports. You only get half the benefit of an audit if the auditor only states what’s wrong. The auditor has to explain how to fix the problems for you to gain the most benefit from the audit. Otherwise, what’s the point of doing the audit in the first place?

An audit should evaluate every piece of equipment individually and the coating process in total to ensure all areas of improvement are exposed and recorded. Furthermore, an audit should evaluate how efficiently the coating process is integrated into the overall manufacturing process at the subject facility. Beyond that, the operators, line management, engineering support, maintenance activities, spare part inventory, consumable material storage, environmental issues, and safety issues must be evaluated in a comprehensive operational audit

Over the years, we’ve gone from publishing reports in three-ringed binders to publishing reports in electronic format. This change certainly improved the timeliness of the delivery of the information to the client. In addition, the client is able to circulate the report throughout the company much easier bye-mail when the report is in electronic form. It sure beats having to pay someone to stand at the copier to print a half dozen copies of a 30-plus-page report!

We always include any documents or correspondence from suppliers contacted on behalf of the customer. These documents can detail improvements, new features, or proposed changes to the existing process. The evaluation and presentation of new, more efficient, and cost-effective finishing technologies that can improve the client’s operation is a key component of an operational audit.

The report must be formatted to ensure easy reading. A summary, a recommendations list, detailed observations, instrument readings, and so forth are necessary to easily communicate all the issues and how to best improve the process. The report’s findings must be firmly rooted in facts and less dependent upon opinions. This is where presenting all the obtained data is important.

Our company uses tables, performance graphs, photographs, and other materials to simply and effectively communicate all the information collected, including the results of Design of Experiments (DOE) executed during the audit.

A simple “checklist” by itself isn’t a complete operational audit report because it doesn’t communicate the “how to’s” or the “why for’s” necessary for implementing the recommended improvements.

All aspects of the report are treated with complete confidentiality because this is intellectual property belonging to the client.

As personnel changes occur in every organization, operational audit reports often outlast the persons who originally asked for them. Furthermore, all the recommendations can’t be implemented at once due to funding or timing issues. Therefore, the audit report must be able to stand the test of time, as it may be shelved and referred to over a prolonged period to accommodate an appropriate implementation schedule that can last years. It’s not unusual for clients to call us with questions years after an audit was performed. We’re proud of the fact that we’ve been providing this complete service to our customers for more than 20 years. This is quite an accomplishment given the changes in the coatings industry during this period.

When is the best time to perform an operational audit?
Some clients say that they’re too busy to perform an audit while others say they’re too slow to justify an audit. The short answer to this question is, anytime is the right time for an operational audit.

For example, performing an audit during busy times will reveal process deficiencies because the equipment and systems are strained. Slower times allow for more detailed inspections of the equipment that may be impractical when they are running 24 hours a day 7 days a week.

I personally like to walk the entire conveyor line of a coating process, including through all the ovens and washer. This can prove difficult, if not impossible, when the equipment is running and not allowed to cool, even at off-shift hours (if there are any off-shift hours). It’s very difficult to judge the condition of equipment that you can only examine from the outside. However, you can only do what is humanly and safely possible during an audit visit, which precludes walking inside an oven that is running at 400°F.

There are no “usual” circumstances in most finishing operations. Every day, unusual things happen in finishing systems, making “unusual” a “normal” occurrence. Therefore, operational audits serve purposes in both slow and busy times. The only things that are required to perform an audit are that the equipment is operational and there are at least a few parts that can be coated to judge the results.

Can you do an operational audit yourself?
It’s awfully hard to perform an objective appraisal of an operation that you work with every day. This doesn’t mean that if you think you’re doing something wrong you shouldn’t fix it on your own. However, most of our clients say they never saw most of the issues identified in our audit report before. That’s what an experienced and objective operational audit company can do best: Identify problems that you never saw before. By all means, self-improvement is a laudable goal. But let’s face it, it’s not easy to spot problems with routine operations without expert outside help.

Once an audit has been performed, you can spot-check some of the same things reviewed during the original audit to see if the improvements are taking hold. This is a necessary activity to ensure long-term process improvement and eliminate bad habits from returning.

An operational audit is the best way to take a snapshot of your current process to identify areas of improvement, higher product quality, better efficiency, and lower operational costs. Choosing an objective and qualified auditor with a proven track record is paramount to achieving these goals.

An operational audit must evaluate all the process equipment individually and the process in total to ensure that all areas of improvement are identified. Clearly, the finishing process has to be effectively integrated in the overall manufacturing process; therefore, this needs to be addressed during the audit as well.

The auditor needs to have all the test instruments to determine the current operating condition of the finishing process. But most important, the auditor must have an “objective and practiced eye” to observe process shortcomings and identify process improvements.

The audit report has to comprehensively and clearly present all the obtained data, DOE results and conclusions, improvement recommendations, new technology recommendations, and so on. This information has to be communicated in a format that is easy to understand and distribute, and that can be referenced over time by the client. Insist on seeing previous reports from an auditing firm before selecting them to perform your operational audit.

Although you could perform your own audit, the best and most complete results are obtained when an independent and objective outside auditor firm is used.

If you are unimpressed with the logic used in this article that operational audits are a necessary practice in today’s competitive marketplace, give us a call or send us an e-mail. I’ll be happy to provide you with examples of our work and testimony of our clients who have experienced significant cost savings, improved profitability, and more dependable quality from their finishing processes by using our services.

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Editor’s note
For further reading, see the “Index to Articles and Authors 1990-2008,” Reference and Buyer’s Resource Issue, Powder Coating, vol. 19, no. 9 (December 2008), or click on the Article Index at [www.pcoating.com). Article can be bought online. Have a question? Click on Problem solving to submit one.

Nick Liberto is president of Powder Coating Consultants (PCC), a division of Ninan, Inc., 1529 Laurel Ave., Bridgeport, CT 06604. Established in 1988, PCC is an independent engineering firm specializing in the use of powder coating technology. Nick has more than 2 decades of experience in the powder coating industry and is a member of many industry associations, including the Application Equipment Technical Committee of the Powder Coating Institute. A registered professional engineer in Connecticut, he holds a bachelor’s of science degree in mechanical engineering with a minor in physics. A prolific writer and seminar presenter, Nick is a contributing author to two industry handbooks and more than 30 articles for various industry magazines, including Powder Coating magazine. Nick has held various sales, marketing, and technical positions for Ransburg­Gema and Interred, which are powder application and recovery equipment companies. He can be contacted at 203/366­7244; email [pcc@powdercoat.com}; Web site [wwwpowdercc.com].