Calculate the True Cost of Regrind for Your Business

Many in the plastics molding industry believe that regrinding scrap isn't a major concern. However, this overlooks the significant costs associated with reprocessing materials. While regrinding can seem cost-effective, analyzing the true financial impact is crucial.

Consider a company with $50 million in annual sales, an 11% scrap rate, and a 52% Cost of Goods Sold (COGS) for materials.

Use this Excel template to detail the breakdown of your regrind cost analysis.

This example demonstrates how to determine the true cost of regrind:

1. Calculate Scrap Material Costs and Regrind Pounds:

Metric

Actual Material Costs [B]

Actual Material Costs [B]

Current Scrap Rate [C]

Average Price per Pound [D]

Scrap Material Costs [E]

Regrind Pounds [F]

Formula

[B] * [C]

[E] / [D]

Value

$50,000,000

$26,000,000

11%

$0.75

$2,860,000

3,813,333

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2. Determine the Cost of Regrind per Pound:

Cost Component

Material Cost

Labor / Processing

Machine Depreciation

Regrind Value

Value

$0.75

$0.35

$0.10

($0.35)

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3. Calculate the Annualized Cost of Regrind:

Cost Component

Annualized Cost of Regrind [H]

Regrind as a percent of Sales

Formula

[F] * [G]

[H] / [A]

Value

$3,241,333.33

6.48%

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This analysis reveals that regrind costs the company over 6% of its annual revenue. In today's competitive market, such a significant expense on a non-value-added activity warrants attention.

Key Takeaways:

Regrinding is not free: It involves labor, machine wear and tear, and energy consumption.
Hidden costs add up: Even small expenses per pound can result in substantial annual costs.
Reducing scrap is crucial: Even a small decrease in scrap can significantly impact the bottom line.

By understanding the true cost of regrind, companies can make informed decisions about scrap reduction strategies and improve their overall profitability.

Further Considerations:

Spreadsheet Tool: A spreadsheet can help calculate the cost of regrind for your specific business.
Additional Costs: Explore other potential costs associated with regrind, such as storage, quality control, and potential material degradation.
Scrap Reduction: Analyze the potential impact of reducing scrap rates by 1%, 2%, or 5%.

Plastic molding companies can optimize operations and enhance competitiveness by proactively addressing regrind costs.

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The Hidden Cost of Regrind:A Closer Look

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The Hidden
Cost
of
Regrind:
A Closer Look