Material Loss
Contractual percentage buffers factored into bill-of-materials procurement quantities account for expected component loss during automated setup and assembly. Establishing a scrap allowance ensures that contract manufacturers order sufficient raw parts to complete specified assembly production quantities despite feeder attrition and line setup losses. The allowance threshold applies strictly to normal manufacturing waste and excludes catastrophic lot loss caused by machine malfunction or gross operator error.
Yield Calculation
Automated surface mount pick-and-place lines lose small quantities of components during tape loading, vision calibration, and high-speed indexing. Ultra-small passive components like 0201 resistors exhibit higher loss rates than large integrated circuits, prompting variable scrap allowance percentages based on package size and handling complexity. Turnkey procurement teams order additional reels or cut tapes matching the negotiated allowance to prevent line stoppages caused by component shortages.
Unused excess components ordered under scrap allowances remain customer property or undergo inventory credit reconciliation at production run completion. Standard industry scrap allowances range from one to five percent depending on component unit cost and package type.
Cost Adjustment
Discrepancies between negotiated scrap allowances and actual factory component attrition trigger manufacturing process reviews. High component attrition rates signal feeder wear, improper tape loading, or poor vision sensing. Controlling component scrap directly improves contract manufacturing profit margins.
