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Inventory Management Series: Managing Scrap and Drop in Custom Metal Fabrication

One of the least appealing subjects for any custom metal fabrication shop is the management of scrap and drop, but it is a reality for all manufacturers that involve themselves in metalworking. Effective material utilization, reducing reworks and constantly reviewing manufacturing processes are effective solutions, but metal fabricators must practice what they preach. Scrap is the waste generated by the metal fabrication process. As such, it can be an indication of a manufacturing efficiency problem that should be addressed as quickly as possible by the contract manufacturer. This directly affects the margin on manufactured parts for the fabricator and can also indicate if there is an OEM design issue afoot that should be ironed out by both parties.

Design-engineering is easier when engagement is healthy with a contract manufacturer.

Scrap is Inevitable, So Keeping Tabs is Important 

Custom Metal FabricationThe question is never “will there be scrap?”, but will always be “how much scrap?” As a general rule, keeping scrap below 20 percent of used materials should be the goal if a combination of laser, plasma, oxy and sawing operations are used. This percentage may vary depending on the variety of metal fabrication processes used. This is much easier said than done, but knowing a problem exists begins with first tracking the data. 

If you’re an OEM currently working with a contract metal fabricator or you want to begin outsourcing work to a contract fabricator, you will want to keep tabs on how they manage their inventory and scrap. While you might not receive the immediate hit from the scrap and rework of your parts, your contract partner will feel the pain if specifications, such as dimensional tolerances, are not properly communicated. A good contract manufacturer will have software available to track inventory, material utilization for each part, and the amount of rework or scrap is generated in a given manufacturing process. 

Optimize the Manufacturing Process 

Reducing scrap starts with material utilization. Depending on the size of the project, it might not make sense to order custom sized sheets from mills (these must be ordered at a minimum tonnage of around 100 tons), but they are justified more often than not. By ordering custom-sized sheets, you’re ordering close to the exact amount of material needed for each product, reducing the potential for scrap.

Then, as would be done anyways, there must be constant inspection of the components of the manufacturing process. Inefficiencies, or areas of the process where reworks become frequent, must be evaluated on their own terms for each individual product. Knowing where constraints occur, or even where the majority of the scrap is generated, is the next step to bringing scrap levels down to an acceptable level.

Too Much Scrap Could Be an Indication of a Larger Problem

While the percentage of acceptable scrap can vary depending on the mix of services, too much scrap on a consistent basis could mark the indication of a larger problem. Either the metal fabricator is not doing their proper due diligence to ensure material utilization is optimal or there are flaws in the model or design that must be addressed. While scrap is something OEMs don’t see hit their pocketbooks directly, it could be a symptom of a problem that needs to be addressed to improve efficiency and drive down costs. By requiring an OEM design-engineer to stay in touch with the contract manufacturer, efficiency issues that might lead to abundant scrap can be nipped before larger issues arise in the long run.

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