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I am in debate with a vendor over the proper way to calculate a waste percentage on a job.
My way: ((Total material used/Total material planned or needed)/100)-100
OR my other way: Scrap/Total material planned or needed
What my vendor is doing is: Scrap/Total material used.
Who is correct?
You may like to focus on the output rather than the scrap. If 80kg of finished product was produced from 100kg of raw material the scrap would be 20kg, meaning
Scrap = ( [Material Input] - [Product Output] ) / [Material Input]and
Product = ( [Material Input] - [Material Wasted] ) / [Material Input]Material used for the production is 100% in either case, some of which ended up in good produce and the rest is scrap. I think it's important to calculate both product and scrap using the same formula because whatever isn't one must be the other.
Material "planned or needed" is problematic and possibly not the same. The vendor needs 80kg, but he must allow for scrap. So he buys 110kg. After using 100kg he ends up with 10kg extra material which he planned but didn't need and which isn't scrap, either.
Good question, my assumption would be that your answer would vary from industry to industry.
In my view if you show what method/calc you use then that leaves no question in the readers mind as to what method was used to calculate these numbers.
In such situations and depending on who my target audience was I'd usually put in a foot note at the bottom of the report as to what calculation method was used.
There are many examples of these situations around where the correct answer would depend on the industry benchamrking calc's etc