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The Differences Between Scrap, Rework, & Spoilage

In the manufacturing world, the terms “scrap,” “spoilage,” and “rework” are often used – all describing costly occurrences that companies make all efforts to avoid. In a perfect world, equipment wouldn’t malfunction, humans wouldn’t make operating errors, and all raw materials would be converted into finished products able to be sold. However, manufacturing isn’t a perfect world, and some waste does occur. And, while eliminating these is nearly impossible for most organizations, taking proactive steps to limit the occurrence of each of them is advised. Before discussing these preventative measures, it’s important to first understand the differences between the three and how each affects the rest of the manufacturing process and overall productivity and profitability.  

What is Scrap?

The term scrap refers to material left over when producing an item. In some cases, scrap materials can be sold to other manufacturers or consumers, but the value is fairly negligible when compared to the value of the finished product. So, why does scrap occur? There are multiple reasons for a company to have leftover or excess raw material. In some cases, errors in the ordering department mean too much material gets ordered, resulting in excess inventory and often scrapped material. In other cases, poor designs or poorly executed production processes leave too much in the way of scrap material. No matter the cause, manufacturers strive to reduce scrap as much as possible – and for good reason. Even if scrap can be sold or repurposed, it isn’t as valuable as if that material would have been a part of a finished item to be sold. It also adds to the time needed to process material, and in manufacturing – time is money. Excess scrap means less revenue overall and lower profitability for a manufacturer.

What is Rework?

In contrast to scrap, rework refers to finished goods that don’t meet quality standards, but can be adjusted or repaired to get them to a level of quality that is acceptable for customers. If an item can be sold after these repairs, then what is the harm? Rework, while often ending in a quality finished item, takes more time, labor, and money to essentially “remake” a product. If a product must be disassembled, adjusted, and reassembled – that nearly triples production time, and that means paying more labor as well as overhead like utilities. Those extra costs affect profit margins, making a product less profitable for a manufacturer when it has to be reworked prior to selling.

Causes of rework vary as well but often include equipment malfunctions or misalignment or operator error. Even damages incurred after an item is fully produced (i.e. during transport) can result in the need to rework the item. The occurrence is even more hurtful to an organization when they go unnoticed for long periods of time. Issues corrected quickly have less of an impact than those that go unnoticed or unsolved, resulting in the need for more and more items to be reworked.

What is Spoilage? 

Unlike scrap and rework, not all manufacturers have to worry as much about spoilage. The occurrence mostly affects those whose raw materials have a shorter lifespan. While various definitions of the event exist, spoilage generally refers to waste materials and low-quality finished goods generated via the production process that can’t be reworked or used for any other purpose and must be discarded.  

Spoilage is generally classified further as “normal” or “abnormal,” with the former referring to that which is expected during normal production and is accounting for in costing. Abnormal spoilage is beyond what is expected. Because this spoilage isn’t accounted for when costing out a product, it negatively affects the profitability of the product if left unaddressed.

How can an MES Help Reduce Scrap and Rework?

The level of waste accumulated throughout the production process can be improved through the implementation of more precise and proactive processes. Among the helpful software solutions available to manufacturers currently, a quality manufacturing execution system (MES) provides real-time visibility of the shop floor as well as real-time communication of any quality control issues to all relevant parties. Having this information consistently at their fingertips allows for managers to address those issues before they escalate or affect any more production runs. The software can also make some adjustments automatically, making decisions based on data and eliminating the need for a human to make these decisions.

This visibility and ease of communication have proven successful for manufacturers across a number of industries. At IMCO Software, we’ve found that MES solutions reduced scrap and rework by more than 33%. In doing so, it also increased machine utilization by over 15%. When talking about large-scale production runs, those reductions pay off – both in productivity and profitability.

The selection of proprietary software we’ve developed and our suite of partner integrations allow the team at IMCO Software to provide customized and curated solutions for top manufacturing organizations. For the past two decades, we have been helping manufacturers implement systems and solutions to streamline operations and improve KPIs. Our success is tied to our extensive selection of manufacturing, supply chain management, and information technology software solutions that allows us to curate the best possible combination of software to meet each organization’s specific needs.

If you are ready to transform your shop floor and improve KPIs across the board, the team at IMCO would love to help. Our solutions provide greater visibility, ease of communication, and a lessened likelihood of excess scrap or rework.  Contact us today to learn more!

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