Scrap and Rework Costs
Category: Operational
Measures the costs associated with defective products that need to be scrapped or reworked.
What it Measures ?
% of total cost due to scrap or rework.
Relevant StakeHolders
Production, Quality, Finance
Why it Matters ?
Reduces production waste and costs.
In-depth Use Case / Real-world Example
A company manufacturing clothing calculates Scrap and Rework Costs by tracking the cost of defective items that need to be discarded or reworked. For example, if the company spends ₹1 lakh on reworking defective products and scrapping 200 items, the scrap and rework costs help identify inefficiencies in the production process.
Sample Formula
Cost of Scrap and Rework / Total Production Cost