The production margin killer hiding in plain sight

Waste that isn’t factored into your production calculations is an invisible margin killer which quietly drives up material usage, disrupts purchasing plans, and makes your cost estimations less reliable. Lean manufacturing principles remind us that prevention is always better than disposal. By spotting the signs early, you can reduce waste before it happens, reuse what you can, and only discarding as a last resort.

What is waste?

In the context of production, waste typically falls into two categories:

• Startup waste: a fixed quantity lost at the beginning of each run during setup, calibration, or warm-up.
• Running waste: a percentage of material lost during the run due to tool wear, quality drift, or handling defects.

Building waste allowances into your production runs keeps material requirements and costs accurate. When they aren’t, the gaps will show up across your purchasing, inventory, and costing.

1. Planning for waste

Unplanned waste will always cost more than it should. When waste allowances are not factored in before production starts, your purchasing, inventory, and costing become inaccurate. That inaccuracy is where the hidden margin killer creeps in and cascades through the entire process.

Signs to look out for in your inventory levels and costs:

• Inventory forecasts that don’t match actual usage once production starts
• Purchases that overshoot or undershoot real requirements
• Costs that look profitable until real consumption is measured
• Margins that look better on paper than they really are

2. Capturing planned waste costs

Waste allowances that are not factored in from the start can compromise future production runs. Without accounting for running waste, you could risk falling short on materials mid-production, overusing stock that wasn’t planned, or force costly last-minute orders to compensate.

Signs to look out for during production runs:

• Production runs stop due to low material availability
• Frequent stoppages for rework or adjustments
• Unit costs that fail to reflect the true amount of material consumed
  
  

3. Value recovery and recycling

Material value doesn’t disappear just because of a defective assembly. When defective assemblies are scrapped in full, you lose not only the faulty component but every reusable part it contains.

Signs to look out for:

• Entire assemblies are scrapped when only one component is faulty
• No clear process to separate usable parts from scrap in the system
• No tracking of recovered components returned to stock

Handling waste with RamBase Cloud ERP

Waste elimination depends on the accuracy and reliability of your system at every step. With RamBase Cloud ERP, everything connects. Our customers benefit from zero inventory discrepancies, confidence in product reliability, and traceability to item-level to name a few.

When waste is correctly accounted for:

• Material consumption tracking becomes accurate
• Inventory planning improves
• Cost estimations match reality
• Margin reporting is accurate

And if defects occur mid-production, our value recovery and recycling process ensures you can:

• Identify and isolate affected units
• Recover reusable components at part or item-level and return them to stock
• Scrap only what’s truly unusable with full traceability
• Protect material value and spend less on materials you recycle 
  
  

To see these results in action, take a look at our Easy-Laser AB customer story or get in touch with us directly.