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Material yield and loss cost

Close the month’s mass balance: how much raw material became good product, where the rest went, what it costs net of scrap sales and what reaching the target is worth.

Pre-sizing and estimating tool: results do not replace design, calculations or reports signed by a licensed professional, nor verification against the applicable codes and standards.

Preliminary estimate
Raw material for the period

Usage = opening stock + receipts − closing stock, over the same period as good output (e.g. one month).

Good product
Weighed losses
See what was read

Weights in lb and values per lb, regardless of the units button. Unaccounted loss is worked out automatically (balance closure): do not list it.

Target and period
Economic analysis
—Material yield
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Pareto of loss cost

Net cost of each loss in the period (material lost − resale value + extra cost), largest first, with the cumulative percentage.

Tap the chart to see the values.

Mass balance

Where the raw material used in the period went: good product, each weighed loss and the unaccounted loss.

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Next step

Take this page’s results to another calculator with the fields already filled in.

Project payback

Cash flow of the improvement: investment in year 0 and annual savings escalated at the rate entered, discounted at the MARR.

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The calculation report gathers this page's inputs, results, equations, assumptions and references, with fields for project, engineer and revision. The full report also includes the charts and interpretations, in color. In the print dialog, choose Save as PDF.

Method, assumptions and references

Equations used

Yield = good product ÷ raw material used; good product = good parts × unit weight (or weight entered)
Unaccounted loss = raw material − good product − Σ weighed losses
Net cost of each loss = weight × (raw material price − resale value + extra cost); net cost per good unit of weight = (material × price − resale + extras) ÷ good product
Saving at target = [raw material − good product ÷ target] × average net cost per unit of weight lost × periods per year

Assumptions and limits

  • Good output stays the same; reaching the target cuts raw material purchases and losses by the same amount, keeping the loss mix (same average resale value and extra cost per unit lost).
  • Rework that recovers the part is not a weight loss: its cost belongs in the cost of poor quality. Labor and energy spent on scrapped parts are not included here either.
  • Raw material and good product must cover the same period and the same basis (dry or wet); poor inventory counts show up as unaccounted loss.

Standards and technical documents

  • Juran, J. M.; De Feo, J. A. Juran’s Quality Handbook, 7th ed., McGraw-Hill, 2016 (cost of poor quality)
  • ISO 14051:2011 Environmental management — Material flow cost accounting — General framework
  • Himmelblau, D. M.; Riggs, J. B. Basic Principles and Calculations in Chemical Engineering, 8th ed., Prentice Hall, 2012 (mass balances)
  • Schaltegger, S.; Zvezdov, D. Expanding material flow cost accounting, Journal of Cleaner Production 108, 2015

U.S. regulations

  • EPA 40 CFR Part 261: identification and listing of hazardous waste (scrap and residue disposal)
  • ASC 330 Inventory: abnormal amounts of wasted material recognized as current-period charges

Frequently asked questions

What does this calculator do?

It closes the mass balance for a period: how much raw material became good product, how much went to each loss and how much is left unexplained. Then it works out loss cost net of scrap sales and how much the plant saves a year by reaching its yield target. Use it for the monthly close or to justify a loss reduction project.

How do I read the example result?

The stamping shop used 44,000 lb of steel and shipped 52,000 parts at 0.7 lb, or 36,400 lb: an 82.7% yield. Losses total 7,600 lb ($3,800 at $0.50/lb); scrap sold at $0.20/lb brings back $1,360, so the net loss is $2,440 a month, about $29,000 a year.

What is unaccounted loss?

It is what is left after subtracting good product and all weighed losses from raw material used. In the example it is 710 lb (1.6%). Up to 1% to 2% is normal (weighing and inventory rounding); above that, check scales, inventory counts, records and diversion before tackling other losses.

How is the saving at target calculated?

With the same good output, higher yield means buying less raw material: in the example, from 44,000 lb to 36,400 ÷ 0.86 = 42,326 lb, or 1,674 lb less per month. Each pound lost costs on average $0.50 minus $0.18 of scrap value, or $0.32. The saving is about $538 a month, $6,500 a year; the cash flow sets that against the investment entered.

Where do I get the data?

Raw material used is opening stock + receipts − closing stock for the period. Good output comes from production reporting or shipping; losses from weighing scrap bins, rejects and samples. Scrap prices are on the scrap sales invoices; extra cost includes waste hauling and disposal.

Why is selling scrap at a good price not enough?

Because scrap is worth a fraction of what the raw material cost. In the example, steel costs $0.50/lb and scrap sells at $0.20/lb: each pound lost brings back only 40% of its value. The real gain is losing less (better nesting, fewer coil ends and rejects), not selling better.

What are the limits?

It only looks at raw material: labor, energy and machine time spent on scrapped parts are left out (use the cost of poor quality calculator). It assumes the loss mix stays the same as yield improves. Raw material and product must be on the same basis and period, or the balance will not close.