Scrap Accountability in Manufacturing

With the cost of raw materials apparently not going down any time soon, scrap reduction has never been more important for manufacturers. To ensure the maximum use of materials, precision laser-cutting and water-jet machines have been developed. Computerized metal stamping can bring out parts and pieces to the very edge of the stock. In manufacturing, materials management has been made better because both machining technology and management through cost accounting have been improved. In short, accountability is in place on the shop floor and in the front office, and this means that tracking scrap is part of the production process. Of course, the relationship between shop floor and front office has always been one made through data, and it is through data that the root causes of scrap and the methods for its reduction are found.

In short, scrap rate (or yield quality) is a function of production standards and the cost of quality itself: process settings, raw material lots, maintenance activity, operator focus, and so forth. Better working processes and more cost effectiveness in materials management, especially in the creation of scrap, can enhance a manufacturer’s competitive edge. And, competitiveness today is measured in terms of on-time delivery and yield qualities that meet or surpass customer requirements. In the not-too-distant past, just about any level of scrap was considered the necessary result of the manufacturing process; the quantity of scrap was not the issue it would become later when competition arose in the supply chain for diminishing raw material stocks. With the introduction of lean manufacturing and mandates for the reduction of scrap waste through continuous improvement, enterprise resource planning software (ERP) has been developed to strengthen the data-flow between the shop floor and the front office.

To get a good start on scrap accountability, three things must happen. First, you must identify when loss is happening. Only in marking the moments when material loss occurs can you ever see a trend in motion. The identification of loss is both a factor of good inventory management, and an awareness of historical production output. With a good-established-historical baseline in place, material loss trends can be much more easily measured and acted upon as quickly as possible.

Second, a proper method of recording production data is necessary for employees to reveal material use efficiencies. In other words, employees have to have a way, and a requirement, to input good output versus bad product production numbers. Defect issues and other material waste are production data that are not often or easily volunteered. However, when material use is accounted for through a series of reporting mandates, particularly in the easy to use formats of some ERP software systems, there is a greater likelihood of scrap/waste data being collected for later analysis. For example, barcoding and the use of graphical interface terminals around the shop floor provide convenience to workers in being able to input scrap data. In addition, the best reporting techniques will employ a variety of scrap codes and code grouping levels to facilitate analysis.

Finally, a robust, routine, and continuous analysis of scrap data is required in order to bring about both improvements in quality and a subsequent reduction in wasted material. This is truly where a quality ERP software system can be of great benefit. Assuming there is proper recording of scrap data at the shop floor level, management should be able to analyze the information in order to monitor material use and ascertain scrap trends. An ERP software system that collects real-time data from all areas of production facilitates scrap analysis in the most useful and rapid way possible.

To add that extra amount of profitability to a manufacturing operation, look at when, where, and how materials are being used. It is in the increasingly important area of scrap analysis where manufacturers are finding more profit located in the margins. That is to say, by reducing material costs a manufacturer becomes more aware of the use of material in production, and in turn more aware of any disruptions in the material flow patterns and the quality of output.