Waste allowance: why adding 5% is not the same as losing 5%

The purchasing question

A waste percentage needs a denominator. It may mean scrap divided by gross input, or an additional purchasing allowance relative to the net requirement. Both conventions can be useful, but they produce different results and should not share an unlabeled percentage field.

Calculation method

When waste is a fraction of gross consumed material, gross requirement = net requirement ÷ (1 − waste fraction). If an allowance is explicitly a markup on net requirement, gross purchase = net requirement × (1 + allowance fraction). The Nalyquo gross-input waste calculators use the first convention.

Worked example

To obtain 1,000 kg of good output with 5% waste on gross input, plan 1,000 ÷ 0.95 = 1,052.6316 kg. Scrap is 52.6316 kg. Buying 1,050 kg instead would yield only 997.5 kg at that waste rate. At 20% waste, the correct gross requirement is 1,250 kg, not 1,200 kg.

Use measured process data with the same denominator as the calculator. If you also have a fixed startup loss, account for it explicitly; do not automatically apply a second percentage to it. Round purchase quantities up only after the underlying gross requirement is calculated.

Checks before using the result

• Label whether waste is a percentage of gross or net.
• Avoid applying the same loss at two production stages.
• Use separate rates where different materials have different losses.

Common questions