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Scrap & Yield Logic

In manufacturing, raw material and labor are rarely converted into finished products with 100% efficiency. Understanding and calculating scrap is critical for accurate quoting.

Core Definitions

1. Scrap

Material or parts that are discarded during the manufacturing process due to defects, setup errors, or process limitations.

2. Yield

The percentage of non-defective items produced compared to the total items started.

\[ \text{Yield %} = 100\% - \text{Scrap %} \]

Two Types of Scrap in CostEngine

A. Material Scrap (Yield)

Loss of raw material weight during the process (e.g., turning a 2kg bar into a 1.5kg part).

  • Gross Weight: Weight of raw material needed.
  • Net Weight: Weight of the finished part.
  • Material Yield: \(\frac{\text{Net Weight}}{\text{Gross Weight}}\)

B. Process Scrap (Process)

Complete parts lost during specific operations (e.g., a part getting damaged during Threading).

  • Operation Scrap %: The expected failure rate for a specific production step.

Cascading Scrap Calculation

CostEngine uses a Backward-Chain calculation to determine the required input quantity for a target output.

The Problem

If a customer wants 1000 finished parts, and you have scrap at multiple stages, you must start with more than 1000 units of raw material.

The Formula

For any stage \(n\):

\[ \text{Input Qty}_{n} = \frac{\text{Required Output Qty}_{n}}{\text{Yield %}_{n}} \]

Example Scenario

  • Target Output: 1000 pcs
  • Op 3 (Final): 2% scrap (98% yield)
  • Op 2: 3% scrap (97% yield)
  • Op 1: 5% scrap (95% yield)

Calculation: 1. Need for Op 3: \(1000 / 0.98 \approx 1021\) pcs 2. Need for Op 2: \(1021 / 0.97 \approx 1053\) pcs 3. Need for Op 1: \(1053 / 0.95 \approx 1109\) pcs

Result: You must start with 1109 pieces of raw material to ensure 1000 good parts at the end.

Impact on Cost Components

Scrap affects every cost layer:

Component Scrap Impact
Material Cost High. You pay for the Gross Weight, but only the Net Weight leaves the factory.
Setup Cost Low. Usually fixed per batch regardless of scrap.
Cycle Cost High. You spend machine time on parts that are eventually scrapped.
OSP Cost Medium. Vendors charge for the parts they received, even if they scrap some.

Explainability Tree

graph TD
    Final[1000 Good Parts]
    OP3[Op 3: 1021 input]
    OP2[Op 2: 1053 input]
    OP1[Op 1: 1109 input]

    Final ---|2% scrap| OP3
    OP3 ---|3% scrap| OP2
    OP2 ---|5% scrap| OP1

    style OP1 fill:#ffebee,stroke:#c62828
    style Final fill:#e8f5e9,stroke:#2e7d32

Best Practices

  1. Standardize by Material: Castings often have higher scrap rates than bar stock.
  2. Track Actual vs. Estimated: Periodically update the "Expected Scrap %" in the system based on actual shop floor performance.
  3. Recovery (Scrap Credit): For high-value materials (e.g., Titanium, Copper), the system can capture a "Scrap Credit" where the waste weight is sold back as shavings.
\[ \text{Total Material Cost} = (\text{Gross Weight} \times \text{RM Rate}) - [(\text{Gross} - \text{Net}) \times \text{Scrap Credit Rate}] \]