Definition: Scrap Rate measures the percentage of produced units that are irreparably defective and must be discarded. In contrast, Rework Rate quantifies units that failed the "First Pass" quality check but can be brought to specification through additional labor, machine time, or materials.
In financial reporting, Scrap is the visible enemy—it represents a literal loss of raw materials and the sunk cost of energy and labor. However, Rework is often the more insidious threat to operational excellence. High rework rates create a "Hidden Factory" where capacity intended for new orders is consumed by correcting old ones. This results in artificially inflated lead times and a "clogged" production flow that standard accounting often fails to capture.
While both metrics indicate quality issues, they degrade your OEE (Overall Equipment Effectiveness) in different ways:
A common management error is celebrating a low Scrap Rate while ignoring a spiking Rework Rate. If operators are manually "saving" parts to keep scrap numbers down, your manufacturing costs are silently skyrocketing. Pro-Tip: To truly understand process health, shift your focus to Rolled Throughput Yield (RTY). RTY calculates the probability that a unit will pass through the entire multi-step process without any scrap or rework. This is the only metric that accurately reflects true process stability.
By strictly separating Scrap from Rework, manufacturers can drive targeted improvements: