Scrap Management
Scrap is used to describe waste or by-products created during manufacturing that might have little or no economic use. In most instances, however, the scrap still holds some recoverable value through the reuse or reprocessing.
In ERPNext v15, end-of-production scrap is handled systematically by accounting for it in special scrap warehouses. This maintains accurate scrap material tracking, facilitates accurate valuation of stocks, and avoids cross-contamination of scrap with usable inventory.
Scrap in Bill of Materials
In the Bill of Materials (BOM), it is possible to specify the estimated scrap quantity of a raw material that will likely be wasted while producing it. This is stored in the Scrap table in the BOM.
- You can identify which materials are expected to create scrap and in what ratio.
- If necessary, you can individually mark a specific raw material as a scrap item to improve the transparency of the process.
- Items scrapped in the BOM will be automatically taken into account for costing and manufacturing activities.
It enables companies to accurately estimate production costs and avoid overestimation of useable inventory
Scrap in Manufacture Entry
Upon completion of the production process, a Manufacture Entry (Stock Entry of type Manufacture) is posted against a Production Order.
- Scrap items associated with the BOM are brought in automatically in this entry to Items table.
- Only the Target Warehouse gets updated for scrap so that the scrap material gets relocated to a specific scrap warehouse.
- It is necessary to ensure that a Valuation Rate is established for scrap items so that the financial postings are accurate on the value of scrap even if the scrap has little value.
This step helps maintain accounting correctly and avoids mixing scrap products with finished good or raw material stock.
Scrap from BOM versus Material Transfer
Scrap management through the BOM works only if Manufacture Entry is posted on the basis of the BOM. If the entry is posted with a Material Transfer type Stock Entry, then scrap will not be retrieved automatically.
This can be configured in Manufacturing Settings, where you can determine whether production postings should strictly adhere to the BOM or be permitted manual overrides.
Through the use of BOM-based handling, ERPNext makes handling scrap consistent and transparent with actual and expected scrap levels being aligned.