Variable Scrap Rates

Question

For a certain product, if we make quantity 1, the scrap rate is 15%. If we make a quantity 50, our scrap rate is 7%. How should I set up scrap rates in my ERP system as I will never know the quantity that will be ordered. Is there a variable scrap rate functionality?

Julien Patureau · Answer

Hi trinity persful 
 Theoritical scrap is a %, with the same value disregarding the released quantity. 
 I can suggest to set the % of scrap based on the standard quantity released (EOQ?), so the standard cost would be meaningful (if used) and most of the time when releasing a work order based on the EOQ (or approaching qty), the value will be relevant. Of course, if the quantity released is not close from the EOQ, the quantity of raw material to purchase is not correct. You can try to balance this downside using safety stock, to ensure to have enough stock at all time. 
 Another approach would be to set your component twice in the BoM as a fix value and as a proportional value. This suggestion would allow you to a model of quantity needed as y = ax + b where b is your fix quantity and a the poportional quantity. 
 Last approach would be to modify the % of scrap at the work order level (manually or automatically via a custom development).

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