BIZOMAT Tools · Manufacturing

Scrap Cost Impact

What is scrap costing you?

Estimates the direct cost of scrap for a period.

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How this tool works

Inputs, units and where to find them

InputUnitTypical source
Units producedunitsUnits produced in the period
Cost / unit$Cost accumulated per unit at the point of scrap
Scrap rate%Measured scrap rate

What each input means

Open an input to see what it is, its units, the worked example and the common mistakes, with a small diagram.

What this means: Units produced
Illustration: Units producedA row of identical items being counted; Units produced is how many there are.nExample: 20000 unitsUnits produced
What it is
All units made in the period, including those later scrapped. Good output is this total minus scrap.
Units and format
Enter a number in units: a count of units. The form accepts 0 units or more.
Example
The form opens with 20000 units as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
Effect on the result
Scrap units and cost rise in proportion.
Get it right
Count everything produced, not only good units, or the scrap cost is understated.
What this means: Cost / unit
Illustration: Cost / unitA price tag on one unit of measure; Cost / unit is the cost for each unit (per hour, per kilogram and so on).$cost foreach unitExample: $4.5Cost / unit
What it is
The cost already spent on one unit by the point where it is scrapped: material, labour and overhead added up to that stage.
Units and format
Enter a number in $: an amount of money; use one currency for every money input. The form accepts $0 or more.
Example
The form opens with $4.5 as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
Effect on the result
Scrap cost rises in proportion.
Get it right
A part scrapped at final inspection carries more cost than one scrapped at the first operation.
What this means: Scrap rate
Illustration: Scrap rateA bar of 100 parts with the share marked; Scrap rate is that share out of 100. The bar follows the value you type.0 %100 %Example: 3%Scrap rate
What it is
The share of units produced that are thrown away, measured from scrap records over the period.
Units and format
Enter a number in %: percent: the number is read as a percentage, so type 8 for 8 %. The form accepts 0% to 100%.
Example
The form opens with 3% as a worked example. It is an illustration, not a recommended value: replace it with your own figure.
Effect on the result
Scrap units and cost rise in proportion.
Get it right
Type a percentage (3 for 3 %), not a fraction. Reworked units that end up good are not scrap.

Method and formulas

  1. Scrap units = units × scrap rate
  2. Direct cost = scrap units × cost per unit

Limitations

  • Direct cost only; lost capacity, rework and customer effects are extra

Typical uses

  • Making the case for a quality improvement
  • Monthly cost-of-quality reporting

Who it is for

  • Quality and production managers

What you get

  • Direct scrap cost and units
  • Good output

Interpreting the result

  • Use the figure as a minimum value of fixing the cause

References

  • Juran J. M. and De Feo J. A., Juran’s Quality Handbook (McGraw-Hill), cost of poor quality

Learn the Concepts Behind This Tool

These BIZOMAT Library readings explain the method this tool uses, with worked examples.

  • Method explained here · BIZOMAT original book

    Why defect locations matter

    In Defect Maps by the Numbers

    What it covers: Why a tally of defect types hides causes that a map of defect positions reveals, how to record positions on parts, the kinds of defect map, and what rework is costing.

BIZOMAT tools are screening and decision-support utilities. Verify important financial, engineering, safety, legal or operational decisions using appropriate professional standards and your organisation’s approved data.

Open the Scrap Cost Impact calculator