Manufacturing waste costs more than most plant managers realize. Even a small increase in scrap rate can lead to significant losses in materials, labor, and production efficiency. Yet many facilities accept high scrap rates as an inevitable cost of doing business, missing opportunities to dramatically improve their bottom line.
The reality is that scrap rate serves as one of the most telling indicators of overall manufacturing health. When materials consistently end up in the waste bin instead of shipping to customers, it’s a clear sign of deeper issues with equipment reliability, process control, or quality management that demand immediate attention.
In this guide, we’ll break down what scrap rate really means for your operation, how to calculate it, where it comes from, and how to reduce it without guesswork, so your team can start minimizing waste and maximizing profit.
What Is Scrap Rate
Scrap rate measures the percentage of materials or products that become unusable during production. It’s calculated by dividing the total amount of scrap by the total production volume, then multiplying the result by 100.
It’s a critical metric because it shows how efficiently your plant turns raw material into sellable output. When scrap rate goes up, it’s rarely a one-off. It usually reflects problems upstream, like equipment out of spec, inconsistent operator methods, or material defects slipping through.
To get the full view, it’s important to notice that scrap shows up in different forms. Sometimes it's raw materials that arrive damaged or outside tolerance, other times it's work-in-process pieces that fail during fabrication, or finished products that don’t meet quality standards. No matter where it occurs, the impact is the same: lost time, wasted resources, and lower throughput.
The root causes vary, but most scrap comes down to a few core issues. Errors in process steps, subpar material quality, unplanned equipment deviations, and human error during setup or operation all may play a role. Identifying where the breakdown happens is the first step to tightening control and minimizing waste.
How to Calculate Scrap Rate in Manufacturing
Scrap rate is calculated with a simple formula:
Scrap Rate (%) = (Total Scrap ÷ Total Production) × 100
This gives you a clear percentage that shows how much of your production ends up as waste. It’s a baseline for tracking improvement and comparing performance across lines, shifts, or facilities.
Here’s how to do it:
1. Identify Total Production
Start by defining your total output over a specific time period. That could be by shift, day, week, or month. What matters is consistency.
Total production includes everything that came off the line, both acceptable and defective. So you’re measuring actual throughput, not just what passed inspection.
Note that different industries use different units. In metalworking, it might be pieces or pounds. In chemical processing, gallons or batches. Food manufacturing might track items, weight, or cases. The format depends on your process, but the rule is the same: pick one method and stick to it.
2. Count Defective Units
Scrap rate is only as accurate as your defect count. That means you need a clear line between what gets scrapped, what can be reworked, and what’s still within spec.
The truth is that some defects are fixable, but others aren't. If a part can't be salvaged or safely used, it belongs in the scrap column. This distinction is where a structured approach like FMEA comes into play. By mapping failure modes in advance, your team can consistently spot what crosses the line.
But the real key is alignment. Operators, inspectors, and supervisors all need to apply the same standards when identifying scrap. If your definitions vary from shift to shift, the numbers won’t mean much.
And consistency in how defects are classified builds trust in your data. Without that, any attempt to reduce scrap is just guesswork.
3. Divide and Convert to Percentage
With your production total and defect count in hand, calculating the scrap rate is straightforward. Divide the number of scrapped units by the total units produced, then multiply by 100. The result is your scrap percentage.
What that percentage means will depend on your industry. In high-precision manufacturing, even small amounts of scrap can raise red flags. In heavy industry, a bit more waste might fall within acceptable limits. The key is to understand what’s normal for your process and use that as your benchmark.
Why Scrap Rate Matters for Cost and Quality
Every unit that ends up in the scrap bin is more than lost material. It’s time, labor, and energy that no longer contribute to your bottom line.
Scrap drives up direct costs, like raw materials and machine time, but the indirect costs cut even deeper. There’s the overtime to make up for lost output, the rush orders to keep up with demand, and the administrative drag of managing rework and waste. When defective parts make it past the line, customer trust takes the hit.
Scrap rate also tells a bigger story about process control. A high rate is usually a sign that something’s off in your materials, machines, or methods. A low rate, on the other hand, reflects discipline across the board: from setup to execution to quality assurance.
Some teams look to recover value by recycling materials. But current scrap metal prices fluctuate based on material type and market conditions, and even when scrap prices are favorable, the return rarely comes close to covering what was spent to produce the part in the first place. In most cases, stopping waste before it starts is the only move that pays off long-term.
Practical Ways to Lower Scrap Rate
Lowering scrap isn’t about reacting faster, it’s about eliminating the problems before they show up. That means shifting from quick fixes to strategies that target the real source of waste. Whether it’s equipment wearing down, inconsistent operator technique, or material variability, the biggest gains come from controlling the inputs that drive scrap in the first place.
So a lean approach isn’t optional here. The more precisely you can trace where defects begin, the easier it becomes to stop them from multiplying downstream.
That being said, take a look at how you can lower your scrap rate:
Optimize Operator Training
Human error is one of the most avoidable sources of scrap, but only if your team is properly trained.
When operators understand the “why” behind each task, they’re better equipped to respond when conditions shift. And that matters, especially in environments where one misstep can turn good material into waste.
For that to work, standardized work instructions are essential. They remove variability between shifts and help ensure every operator follows the same proven process, regardless of experience level.
And training shouldn’t stop after onboarding. Regular refreshers reinforce expectations, keep pace with any changes to equipment or process, and sharpen the precision that’s critical in high-waste areas like fabrication and machining.
Improve Preventive Maintenance
Machines don’t fail all at once. They drift. And when they do, scrap is often the first sign.
A worn tool, misaligned fixture, or lagging motor can quietly push products out of spec before anyone notices. That’s why consistent preventive maintenance isn’t just about uptime, it’s about keeping quality stable.
Routine servicing, planned through a structured maintenance calendar, helps catch issues before they show up in your scrap count. When machines run within their design limits, product variation stays under control.
Unplanned equipment failures, on the other hand, disrupt everything. They spike defect rates, trigger downtime, and force reactive decision-making. A digital maintenance system helps stop the cycle by flagging small issues early, before they compromise output.
Use Data to Pinpoint Defects
Scrap often hides in patterns you won’t catch on the floor. That’s where good data comes in.
Statistical Process Control (SPC) and other analysis tools help surface trends long before they turn into costly issues. Whether the problem ties back to a specific shift, machine, or material lot, the goal is the same: trace the source and eliminate it.
Tracking scrap across multiple dimensions brings that clarity. Focus on:
- Machine-specific scrap rates
- Time-based patterns by shift, day, or season
- Material batch correlations with failure spikes
- Operator-specific metrics to spot training gaps
As a reference point, the quality rate formula helps visualize the flip side of your scrap rate:
Quality Rate (%) = (Total Production - Total Scrap) ÷ Total Production × 100
This gives you a clean view of how much of your production is consistently hitting the mark.
Example Calculation of Scrap Rate
Let’s say a metal fabrication shop produces 2,000 units in a week. After inspection, 100 of those are scrapped due to defects.
Using the formula:
Scrap Rate (%) = (100 ÷ 2,000) × 100 = 5%
A 5% scrap rate might be acceptable in some operations, but it still leaves room to improve. Even a small reduction here can lead to significant cost savings over time, especially when materials and machine hours are tight.
Tracking scrap rate on a weekly basis gives teams visibility without overwhelming them with noise. It helps flag early signs of drift and keeps improvement efforts grounded in actual performance, not assumptions.
While benchmarks vary, most established operations aim for scrap rates under 5%. Top-performing plants often push below 2%, especially in precision-driven industries where waste carries a higher cost.
Scrap Steel Prices and Other Materials: What Scrap is Really Worth
Recycling scrap can help recover some value, but it rarely balances out what was lost during production.
The resale price of scrap metal depends on several variables: material type, purity, market demand, volume, and even how it's sorted. For example, clean steel or aluminum will always earn more per pound than mixed or contaminated loads. And copper tends to yield higher returns than steel, simply because of its intrinsic value and strong recycling demand.
But prices move constantly. Scrap steel rates shift with global supply trends. Aluminum and stainless pricing changes by the month. And if your volume is low or your site is far from a large recycling center, transport costs can eat into any potential return.
It’s also true that different industries handle this trade-off in different ways. Electronics manufacturers may reclaim precious metals from circuit boards, while automotive plants might focus on steel and aluminum. In both cases, recovery makes sense only when the economics and logistics line up.
That’s why scrap prevention consistently delivers more value than scrap recovery. Even when rates are favorable, the resale price often covers only a fraction of the original material and processing cost.
Understanding the market matters a lot, but controlling your scrap rate still does more for your bottom line than chasing recovery value after the fact.
Moving Forward with Real-Time Tracking and Maintenance
Scrap reduction isn’t just about processes, it’s about timing. The faster you spot an issue, the easier it is to prevent waste from building up.
A well-implemented CMMS helps teams organize maintenance routines, equipment histories, and inspection workflows in one place, so no failure, overlooked task, or quality issue gets buried.
With the right system, teams can track which assets generate the most scrap, log recurring issues, and link every work order to a measurable outcome. It becomes easier to prioritize inspections, flag high-risk equipment, and create feedback loops that catch problems before they repeat.
Layer in real-time condition monitoring, and the process gets even tighter. Sensors and tracking tools can help detect process drift and equipment wear before defects show up in output. That way, operators can act on early warnings, adjusting parameters before materials are wasted.
Just ask the team at SWARCO, who saved $420,000 by staying ahead of the curve.
“In the case that something develops, this system alerts us, and we jump on it. From a maintenance standpoint, it gives us a lot more transparency to our machinery.” – Walt Harrison, Control & Automations Engineer at SWARCO
Scrap prevention is all about having the right tools to stop them from happening in the first place.
How Tractian CMMS Reduces Manufacturing Waste
In fast-moving industrial environments, reducing scrap takes more than awareness. It takes control. The problem is, getting that control isn’t easy. Between untracked quality drifts, unplanned machine wear, and gaps in reporting, waste often builds up long before anyone sees it.
That’s where Tractian CMMS makes the difference. By centralizing work orders, maintenance histories, inspections, and asset health in one place, it gives your team the real-time visibility needed to catch issues before they turn into scrap. You can schedule tasks by condition, link work directly to equipment performance, and automatically flag risk trends, so quality and uptime stay locked in.
Also, with AI-driven insights, the system goes further, scheduling tasks based on actual equipment condition and even recommending actions based on historical patterns and behavior. Technicians get alerts with context, root cause support, and clear priorities so quality stays under control and scrap doesn’t stand a chance.
And that’s just the beginning. The same system that helps cut waste also improves audit readiness, tracks compliance, and streamlines every part of your maintenance operation.
Still losing time and materials to preventable waste? Tractian CMMS gives you the control and clarity to reduce scrap rate and maximize efficiency across your operations.
