- Scrap rate is material lost; rework rate is material recovered at additional cost. They must be tracked separately.
- Rework is usually the larger and less visible cost, because the hours consumed rarely appear in a quality report.
- Value scrap at the cost accumulated to the point of failure, not at raw material cost.
A part scrapped after five operations has consumed five operations of labour, machine time and overhead, plus the capacity that could have made a good part. Valuing it at raw material cost can understate the loss several times over.
Defining the measures
- Scrap rate. Units scrapped divided by units started, in the same period.
- Rework rate. Units requiring any rework divided by units started.
- Express both against units started, not units shipped, or the denominator moves with your losses.
- Decide whether setup pieces count. Whichever you choose, apply it consistently and state it, since this single definition choice can double or halve the reported figure.
Why rework hides
Scrap creates a physical pile and usually a transaction. Rework creates neither: a unit is adjusted, re-run or touched up and continues down the line. The hours consumed come out of production capacity and are absorbed into the standard cost, which is why organisations are frequently surprised by their true rework volume when they first measure it.
Valuing the loss properly
- Material at cost, plus labour and machine time accumulated to the failure point.
- The capacity consumed, which matters most when the operation was on a constraint.
- Rework labour, inspection and re-inspection.
- Disposal or recycling cost, and any regulatory handling requirement.
- Where it caused a late delivery, the cost of expediting or the commercial consequence.
Making the numbers act
A monthly percentage on a report changes nothing. A daily Pareto of scrap by reason and by station, reviewed at the production meeting, changes behaviour within weeks, because the top reason becomes a shared problem rather than an accounting line.
The reporting honesty problem
Where scrap and rework are used to evaluate individuals, both stop being reported accurately and the data becomes useless for improvement. Treating the numbers as process information rather than personal performance is not a soft choice; it is the only way to keep the measurement valid.