Example of estimating materials

According to the BOM you need 20 screws to make one box. Some of the screws break or bend, while they are being screwed into the box. To replace these screws, 5% extra screws are planned: the scrap factor is 5%.

The calculation proceeds as follows:

Ordered quantity: 27 boxes
Net quantity: 540 screws
Yield: 90% (10% rejects)
Quantity planned output: 27 boxes
Quantity planned input: 30 boxes (=27/0.90)
Scrap factor for screws: 5%
Estimated quantity: 630 (= 540 x (1+5/100) x (30/27))

Example

A production order for 27 boxes is created. There is only one operation. Normally, 10% of the boxes are rejected in the final quality inspection. That means that the yield is 90%. To compensate for the anticipated loss of 10% of the boxes, the planned quantity is set at 30 boxes.