For a particular inventory item, we can define a shrinkage rate to describe expected scrap or other loss. Using this factor, the planning process creates additional demand for shrinkage requirements for the item to compensate for the loss and maintain supply.
For example, if there is a demand of 200 and a discrete job for 100, the planning process would suggest a planned order for 100 to meet the net requirements, assuming no shrinkage rate exists.
With a shrinkage rate of .2 (20%), Oracle Master Scheduling/MRP and Supply Chain Planning assumes a loss 20% of any current discrete jobs and 20% of any suggested planned orders. In this example, since there is a discrete job for 100, assume a loss 20% of that discrete job,or 20 units. The net supply from the discrete job is 80. Since we have a total demand of 200 and supply of 80, we have a net requirement of 120 units. Instead of suggesting a planned order for 120, the planning process has to consider that 20% of that planned order is also lost to shrinkage.
Component yield is the percentage of a component on a bill of material that survives the manufacturing process. A yield factor of 0.90 indicates that only 90% of the usage quantity of the component on the bill actually survives to be incorporated into the finished assembly.
The difference between a shrink rate and component yield is that Oracle Master Scheduling/MRP and Supply Chain Planning applies the same shrink rate to every use of an item on a bill, whereas you can vary the component yield factor you assign to each occurrence of an item on a bill. Another difference is that shrinkage demand is calculated at the parent assembly level and passed down to components. Component yield is calculated at the component level.