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Scrap Rate

Percentage of production output that is scrapped and cannot be reworked — a direct measure of material waste and process capability.

Formula

(Scrapped Units ÷ Total Units Produced) × 100%

Benchmarks

World-class: <1% Good: 1–2% Typical: 2–5% Poor: >5%

What Is Scrap Rate?

Scrap Rate measures the proportion of production output that must be discarded because it cannot be reworked to meet specifications. Unlike rework, scrapped material represents a total loss — the material, labour, and machine time are unrecoverable.

The Formula

Scrap Rate = (Scrapped Units ÷ Total Units Produced) × 100%

Can also be expressed by value:

Scrap Rate (value) = (Scrap Value ÷ Total Production Value) × 100%

The value-based formula is useful for prioritising improvement — a 2% scrap rate on an expensive product costs far more than 5% on a cheap one.

Data Requirements

SourceRequiredWhat You Need
Machine DataYesProduction count, scrap count
ERPOptionalMaterial costs (for cost-based analysis)
MESOptionalScrap reason codes

Scrap Rate is a Phase 2 metric — it can be calculated from basic machine data.

Why It Matters

  • Direct cost impact — scrapped material is pure waste
  • Process capability — high scrap signals an unstable or incapable process
  • Environmental responsibility — scrap is material waste that often cannot be fully recycled
  • Improvement opportunity — scrap reduction often offers quick wins with measurable financial return

Common Pitfalls

  • Not distinguishing startup scrap from production scrap — startup waste may be inherent to the process
  • Including reworkable items in scrap counts — this inflates the metric and obscures the true loss
  • Not tracking scrap reason codes — you need to know why to fix it

Best Practices

  • Track scrap by reason code (material defect, process error, handling damage, etc.)
  • Calculate the cost impact: scrap rate × material cost gives the financial picture
  • Focus improvement on the highest-cost scrap causes, not just the highest-volume ones
  • Investigate scrap spikes immediately — they often indicate a process change or equipment issue
  • Separate startup scrap from steady-state production scrap for meaningful trending