Establishing Targets for Scrap

[macvicar]

Hello,

Does anyone know of industry standards or formulas to develop targets with respect to scrap costs in an assembly shop environment ?

Thank-you

Jeff

 

[tripleZ]

My current budget for scrap/rework is set right around 2% of sales. This is in a mass production environment. I don't have much say over the amount. Upper management sets the goals based partially on past data and partially based on what the owner is dictating for the fiscal year. The value is always less.

Obviously the goal is zero, but likely won't be achieved without adding some serious costs elsewhere. And note that this is internal scrap. Where a customer is concerned, it's zero defects.

 

[mk2000]

Macvicar

This is dependent on deferent organisations and type of environments they work in. You need to clarify what you mean by scrap. In an assembly process usually reject rate is term more commonly used.

If you explain the process I might be able to point you to the right direction.

 

[macvicar]

Our company is a service based organization in which we assemble automotive modules for our customer. The majority of the components we use are consigned by the customer, so our sales are based on our labour. During the assembly, components can become damaged and therefore scrap.

Thanks

 

[mk2000]

Macvicar

There are a few ways you can look at this situation. What I have used in the past is process capability analysis. There is a lot of info on this on the web. I have included some below. However you need to have a target for reject rates in your company in order for this analysis to be useful.

Process Capability: Statistical analysis

Process capability

Example Capability Study

If the company you work for is QS9000 accredited they should have this target which comes from your customer. Based on this target you can workout what would be the scrap for each section of the process. If you have not done this analysis before it can be a bit daunting especially if your statics is not up to scratch.

If you provide more info I might be able to guide you further.

Regards

 

[griffengm]

Simplistic formula: Scrap = Total input - total marketable output.
If working with metals, #purchased - pounds present in final product. Take a look in your scrap hoppers to get a reasonable idea of where to start. If a lot of machining/stamping loss then start there. If a lot of painted or semi-finished parts, then start there. If your product is high volume then stats will help but many processes can begin with an eyeball evaluation.

Griffy

 

[PSE]

mavicar,

As an assembly operation, you might also consider the loss of the value added labor that went into an assembly that gets scrapped in addition to the material value. Looking at this combination could change where you would want to focus on improvement efforts vs. looking at the material values only.

Regards,