Scrap & Rework Impact

Quality failures cost more than just lost output. Scrap wastes every dollar invested in a unit up to the point it’s discarded. Rework consumes additional capacity at earlier steps, reducing the system’s ability to process new units. Together these costs form the Cost of Poor Quality (COPQ), a key metric for justifying process improvement investments.

Key Metrics

Rolled Throughput Yield (RTY) — the probability a unit passes through every step without any quality event. Calculated as the product of each step’s First Pass Yield: RTY = FPY₁ × FPY₂ × … × FPYₙ. A three-step process with 95%, 90%, and 97% FPY has an RTY of 82.9%, meaning only 83 out of 100 units flow through without a single defect.

Final Yield — the fraction of input units that exit the system as good output: Final Yield = Throughput / Input Rate. Unlike RTY, Final Yield accounts for reworked units that eventually pass, so it can be higher than RTY when rework is present. The gap between Final Yield and RTY reveals hidden rework volume.

Cost of Scrap

When a unit is scrapped at step i, the loss includes all processing cost invested in that unit from step 1 through step i:

Cost of Scrap = Units Scrapped × Cumulative Cost Per Unit

A unit scrapped at the final step of a five-step process wastes far more than one scrapped at step one, because it carries the accumulated labour investment of every preceding step.

Cost of Rework

When a defective unit is sent back for rework, it incurs additional processing cost at the destination step. This cost is attributed to the sending step (where the defect originated):

Cost of Rework = Units Reworked × Destination Step Cost Per Unit

COPQ Formula

COPQ = Total Cost of Scrap + Total Cost of Rework

Example

A two-step process handles 100 units per hour. Step 1 (assembly, $25/hr labour) scraps 3% of units. Step 2 (inspection, $30/hr labour) reworks 5% back to step 1.

• Cost of Scrap at step 1: 3 units × cost of assembly = wasted investment
• Cost of Rework at step 2: 5 units × step 1’s per-unit cost = extra labour
• COPQ = sum of both, quantifying the total financial impact of quality failures

Why It Matters

COPQ makes quality problems visible in financial terms. A process with 95% FPY at every step might seem acceptable, but when each defect wastes $50 of accumulated labour, the annual cost of poor quality can dwarf the investment needed to fix the root cause. Tracking COPQ over time shows whether improvement efforts are delivering real savings and helps prioritize which steps to fix first — typically the ones with the highest per-unit scrap cost or the highest rework volume.