Author Written by Sachith Wimalaratna and last updated on Posted on .
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Materials that have exceeded the shelf life, damaged, cannot be used, or reworked are identified as scrap in SAP. In most industries, scraps are generated during the manufacturing or assembly process. SAP Scrapping Process can be related to production planning (PP) and/or material management (MM). This segregation enables users to better understand the concepts related to scrap.
SAP MM Scrapping Process
The material management-related scrapping process mainly relates to how to identify the material stocks which are related to scrapping, and the scrapping or write-off of those stocks from the system.
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Scrap can be categorized into three main types as raw material scraps, semi-finish good scraps, and finish good scraps. Other than these main types, there can be equipment or asset scraps.
Scrapping of Materials
Raw materials procured from vendors will be received at the warehouse. Upon receiving, a quality inspection will be done for the goods received. Quality inspection is done based on an inspection lot created at the goods received point. Based on the inspection, it will be decided whether the received goods meet the quality standards or need to be scrapped. There can be many reasons to scrap raw materials such as shelf-life expiry, damaged goods, quality-related issues, and slow-moving items.
Below are the basic steps of a purchasing process:
Semi-finished goods and finish goods are also scrapped when there are quality issues, damages, or when those materials cannot be used further in the value stream.
In SAP, a stock is maintained in three stock types:
- Unrestricted Use Stock
- Quality Inspection Stock
- Blocked Stock
At the point of goods receipt or production confirmation, it is possible to decide whether the stocks need to be posted into quality inspection stock type. By posting them into quality inspection stocks, these stocks/batch are segregated to see any possible quality issues or pending quality assessment.
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Generally, materials that need to be scrapped are maintained in the quality inspection stock or blocked-stock category. The quality inspection department will check the parameters of the materials and will give the final decision for scrapping. SAP has given the provision to scrap from all three of these stock types and SAP has provided three movement types for each of the stock types.
Scrapping from unrestricted stock is done with the movement type 551. Scrapping from quality inspection stock is done with movement type 553, and scrapping from blocked stock is done with movement type 555. If the stocks belong to special stock types such as sales order stocks, consignment stocks, project stocks, etc., it is possible to maintain the special stock type during the scrapping process and a corresponding movement type will be used.
For the scrapping of materials, there are two transactions that we can use in SAP. We can use MIGO or MB1A, where the latter transaction code is obsolete in the latest SAP S/4HANA version. Follow the below steps in MIGO to carry out the scrapping movement.
- Select the activity as “goods issue”.
- Select the type as “other”.
- Set the movement as 551 which is the goods issue for scrapping.
- Identify the material and the quantity to be scrapped.
- Enter the cost center to which the scrap value must be posted.
- Post the document.
When the document is posted, these stocks will be reduced from the system. We can view the stocks by using the transaction code MB52 or MMBE.
Once the scrapping movement is executed in SAP, two documents will be posted. One is the material document. The Material document will have the stock-related information such as the quantity reduced, movement type, date of the posting, etc. The second document is the accounting document which will have the financial information of the scrapping process such as the accounts in which the debit and credit postings happened. The cost of the scrapped material will be posted to a cost center in SAP.
This will end the material management (MM) scrapping process in SAP.
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SAP PP Scrapping Process
Manufacturing and assembly processes generate scrap during different stages of the production life-cycle. It is important to identify and record this scrap to capture the scrap-related cost and ensure material availability. By maintaining scraps in the system, the planning run will consider the scrap percentage while material requirement planning and generate the requirements to meet the expected yield. There are mainly three types of scraps generated during manufacturing.
- Assembly scrap
- Component scrap
- Operation scrap
Assembly Scrap
Assembly processes generate scrap due to various reasons. There can be environmental factors, as well as certain manufacturing methods that may result in the generation of assembly scrap.
For example, let’s assume that there is a finish goods assembly that requires three raw materials. Each raw material has individual dependent requirements.
Next, for the finished goods, an order is received for 100 pieces. When this order is placed, it will generate dependent requirements for raw materials after the MRP run.
If there is an assembly scrap generated during the process, we can add this assembly scrap in the MRP1 view of the material master. To do that, follow the below process:
- Execute MM01/MM02 and identify the material and plant.
- Select the MRP1 view.
- Find the assembly scrap field and maintain the value as a percentage.
If there is an assembly scrap of 5% to produce the expected yield of 100 pieces, we need to plan more. When assembly scrap is used, it will increase the order quantity of the header material and subsequently increase the order quantity of the components based on the bill of material (BOM). This ensures the material availability to overcome the scrap generated and ensures the scrap cost incurred during the assembly process gets captured correctly.
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Component Scrap
There can be certain components within a manufacturing process where it always consumes more than the planned quantity in the bill of materials. To avoid material unavailability for such components, we can use components scrap.
Component scrap can be maintained as a percentage in the material master or the BOM. Follow the below steps to maintain component scrap in the material master:
- Execute the material master maintenance transaction MM01/MM02.
- Select the plant.
- Select the MRP4 view.
- Maintain the component scrap as a percentage value.
Follow the below steps to maintain the component scrap in the BOM.
- Execute the BOM maintenance transaction code CS01/CS02.
- Give the material, plant, and BOM usage and execute.
- Select a component and click on “item”. If the BOM is being created, add the necessary components first.
- Enter the component scrap as a percentage.
If component scrap is maintained in the material master, that scrap percentage will apply to all the bills of materials to which that component is attached.
If the component scrap is maintained in the bill of material, it will apply only to that assembly or manufacturing component. Component scrap maintained in the bill of material has a higher priority than the value maintained in the material master.
By entering components scrap, it will increase the required quantity of that component and if there are any dependent requirements, the consumption quantities of those will also be increased.
Operation Scrap
During the production process, a sequence of operations will be followed. Some of the operations in the production sequence might generate scrap and generate a production loss. This is considered as operation scrap in SAP. When there is an operation scrap, it is necessary to adjust the following operation quantities:
In this scenario,
- The quantities of the following operations will be reduced.
- The capacity of the work centers in the following operation will become free so that during capacity planning, new order quantities can be allocated.
Example:
Finished Good A is produced by carrying out three operations (Operation A, B, and C). Operation B has 5% of scrap.
If there is a production order to produce 100 units from finished good A, in order to achieve this planned quantity, we need to confirm 100 units from operation A and then 100 units from operation B. Since there is a 5% loss at operation B, the quantity to confirm in operation C will be 95 units.
Operation scrap is maintained in the routing of the material. Routing is used to define the sequence of operations that we need to follow during the production of that material. To maintain operation scrap in routing follow the below steps:
- Execute the route, create/change transaction CA01 / CA02.
- If the routing is not created, first enter the routing operations by selecting the “operation” button.
- Enter the operations in sequence.
- Double-click on the operation sequence number. This will drill down the operation details.
- Scroll until you find the operation scrap field. The value entered here will be taken as a percentage.
Operation scrap can also be maintained in the bill of material. This will be useful when there is an assembly scrap maintained at the header level. If there is an assembly component that has assembly scrap maintained in the material master and there is also operation scrap maintained, the system will only consider the operation scrap.
This setup is particularly useful for assembling high-valued materials. Rather than maintaining assembly scrap which affects the entire process, we can maintain the operation scrap and eliminate the scrap from the operation itself. To facilitate this, we need to maintain the net indicator in the BOM item view.
To maintain operation scrap in the BOM, follow the below steps:
- Execute the BOM create or change transaction CS01 / CS02.
- Enter the material, plant, and BOM usage and execute.
- Now we can view the component list of the BOM. If the BOM is being created, insert the components and the consumptions.
- Select a component and click on the “Item” button. This will display the BOM component or item-related details.
- Enter the percentage value in the “operation scrap” field.
By maintaining these different scrap types, it is possible to plan the production more accurately and achieve the output as expected.
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FAQs
What is scrap in SAP PP? ›
Use. Component scrap is used in MRP to determine the input quantity of the components. When you produce an assembly with this component, the system increases the component quantity to enable you to reach the required lot size. You can enter component scrap in the BOM item or in the material master.
What is the MM movement type for scrapping in SAP? ›You can make material scrapping using the movement type 551 (Withdrawal for scrapping from unrestricted-use stock).
What are the two types of scrap? ›Scrap Metal Classifications: Ferrous and Non-Ferrous Metal.
How many types of scrap are there? ›There are two main categories of metals: ferrous and non-ferrous. Metals that contain iron in them are known as ferrous. Metals without iron are non-ferrous. Common non-ferrous metals are copper, brass, aluminum, zinc, magnesium, tin, nickel, and lead.
How do you scrap an asset in SAP? ›Step 1 − To perform a partial scrapping in Asset Accounting, navigate to Accounting → Financial Accounting → Fixed Assets → Posting → Retirement → Asset Retirement by Scrapping. Step 2 − Enter the Company Code and click the Continue button.
Is scrap considered inventory? ›Scrapping process is an Internal warehouse process in which stock of the material is written-off from Inventory books (if not sold). This will have financial implications as the stock which is written-off has dollar value.
Where do you keep scrap value in SAP? ›You can define scrap value keys with any cutoff percentage rate in Customizing for Asset Accounting . To do so, choose Financial Accounting (New) Asset Accounting Depreciation Valuation Methods Further Settings Define Cutoff Value Key.
What components are best for scrap? ›- Sheet Metal - 8 Scrap.
- Metal Spring - 10 Scrap.
- Gears - 10 Scrap.
- Semi-Automatic Gun Body - 15 Scrap.
- SMG Gun Body - 15 Scrap.
- Electric Fuse - 20 Scrap.
- Tech Trash - 20 Scrap.
- Rifle Gun Body - 25 Scrap.
The scrap arising during the manufacture of finished articles from iron and steel, and usually returned to steelworks after sorting and processing by scrap merchants. Click here to see list of references, authorities, sources and geographical terms as used in this glossary.
What is the T code for scrap in SAP? ›Scrap Value posting using T-code AS91.
How do I create a scrap invoice in SAP? ›
Then the flow of scrap sales: 1)Create a scrap sales order (VA01) F 2) Scrap delivery (VL01N) 3) PGI (VL02N) 4) Performa invoice (F8) or sales Invoice (F2) (VF01) and 5) if excise is applicable for the scrap, then excise invoice (J1IIN) after sales invoice.
What is scrap sales order in SAP? ›In scrap sales a contract will be created with the party who is supposed to purchase scrap from us. This contract will be a rate contract with infinite quantity & a fixed rate per unit of measurement. ( eg Rs.200 / KG)
What are the three types of scrap? ›There are three types of scrap, namely:
(a) Legitimate scrap, (b) Administrative scrap, (c) Defective scrap.
- Ferrous (contains iron)
- Nonferrous (contains no iron)
- Alloys (contains multiple metals and other elements)
A scrap is a little leftover bit of something. You might jot down notes on a scrap of paper, or you might toss a scrap of food to your happy dog. A scrap is typically a small item that originally was part of something larger, like a scrap of fabric that was once part of a larger piece.
What is the easiest thing to scrap? ›1) Aluminum
The versatility of aluminum, as well as its availability, make it one of the best options for those who want to start scrapping metal today. Whatever aluminum you can collect around your home – from soda cans or bicycles – will be worth something when scrapped correctly at a recycling center!
These two different types of metal are typically separated from one another using a magnet. A ferrous metal will be attracted to a magnetic, and a non-ferrous metal will not be attracted to a magnet. Start sorting by using a magnet to determine which metals are ferrous and which are not.
What scrap pays the most? ›For most scrappers, copper is the king of scrap metal because it gains as much as $2 to $4 per pound. When it comes to scrap metal, that's a pretty high amount, especially compared to other metals like aluminum or brass.
What tool is used to scrap? ›When taking apart old equipment for scrap, often, the best scrapping tools are a cordless drill, an impact wrench, and WD-40. Unscrew and disassemble the parts with your drill, and use the wrench when necessary.
How do you calculate scrap? ›- $8,000 - $1,500 - $3,500 = $3,000.
- $3,000 is the amount the insured receives from the insurer.
- Scrap Value = Cost of Asset - ( Useful life in years * Depreciation)
- Initial price = $25,000.
- Estimated percentage of scrap value = 60%
- Then, the scrap value = $15,000.
Is scrap a raw material? ›
Recycled steel (also called scrap steel) is one of the industry's most important raw materials. It comes from demolished structures and end of life vehicles and machinery as well as from the yield losses in the steelmaking process.
What are the 4 ways we can dispose of an asset? ›- #1 – Disposal by Auction. You can always dispose of your old units through an auction. ...
- #2 – For Sale by Owner. You can always try to sell your equipment yourself! ...
- #3 – Trading In. ...
- #4 – Consignment. ...
- #5 – Bonus Option from Leavitt Machinery – We Pay Cash for Used Equipment!
When there is a loss on the sale of a fixed asset, debit cash for the amount received, debit all accumulated depreciation, debit the loss on sale of asset account, and credit the fixed asset.
How do you account for scrap sales? ›Sale of scrap of raw material appearing in the trial balance are shown on the credit side of manufacturing Account. Scrap are goods that have become obsolete or outdated hence, when sold is an indirect income for the company and is to be shown on the credit side of manufacturing account.
What are the 4 types of inventory? ›While there are many types of inventory, the four major ones are raw materials and components, work in progress, finished goods and maintenance, repair and operating supplies.
Is scrap included in cogs? ›This measure calculates the total cost of material that is added into production but is not part of a finished product as a percentage of cost of goods sold (COGS). COGS represents the cost of purchasing raw materials and manufacturing finished products.
Is scrap a debit or credit? ›| Scrap Materials A/c | Debit |
|---|---|
| To, Work -in -Progress A/c | Credit |
| (Value of Scrap are credited to job from where they occurred) |
The initial investment is an outflow, the scrap value is an inflow. Similarly, the revenue of $187,500 per year and the variable costs of $31,500 per year are also incremental cash flows.
Is scrap value same as depreciation? ›Salvage value is the amount that an asset is estimated to be worth at the end of its useful life. It is also known as scrap value or residual value, and is used when determining the annual depreciation expense of an asset.
How do I track scrap prices? ›- Determine the number of scrap items. Production teams often record and handle the waste items and materials that occur during the manufacturing process. ...
- Calculate the total number of completed items. ...
- Substitute these values in the formula. ...
- Multiply by 100 to get a percentage.
How can I increase my scrap rate? ›
- Conduct Process Audits. Many manufacturers' OEE is much lower than they assume. ...
- Improve Communication and Change Management. ...
- Review Material Sourcing. ...
- Review and Improve Training. ...
- Document the Right Things. ...
- Evaluate Maintenance Strategies.
– Copper is by far the most expensive metal. High-grade copper, called Bare Bright, can get up to $2.85 a pound. Low-grade copper like the kind found in Christmas Lights is about a quarter a pound. – Aluminum, like the kind in house siding, window frames, or aluminum cans can be worth up to 65 cents a pound.
What is the most common scrap metal? ›The most common scrap metals that we have found are: aluminum, brass, steel, and copper. We can call those common scrap metals the “core four.” Scrap metals are easy to sort if you just start off by learning the most common scrap metals and where you can find them.
What is the purpose of scrap? ›In the transportation industry, it can be used in the manufacture of automobiles, aircraft and other modes of transportation. Another more recent use is in detoxifying industrial wastewater. Scrap metal is also used widely in the production of containers, which are used extensively by many companies.
What is scrap learning? ›Scrap learning, a term coined by KnowledgeAdvisors, describes the wasteland of learning that is delivered but not applied on the job. It's a critical business issue because it wastes money and time—precious organizational resources.
What is MR11 TCode in SAP? ›MR11 is a T-code that is used to automatically create a logistics document to correct postings to the GR/IR GL account 35401010 originating from incorrect logistics invoices created with MIR7.
How do you use T codes CS15? ›Use T-code: CS15
To view the parent material, input material code. Select direct checkbox and material BOM. Click the Next button at the top of the screen. In the next window, enter the required quantity.
CS12 is a transaction code in SAP LO application with the description — Multilevel BOM. On this page, you will find links to SAP Documentation, Wiki & Help Pages, Q&A, similar/related TCodes, Source Tables, and Authorization Objects for CS12. LO-MD (Logistics Basic Data)
How is scrap value accounted for? ›Scrap value is the estimated cost that a fixed asset can be sold for after factoring in full depreciation. The asset that is disposed of is usually salvaged into multiple parts, with each part valued and sold separately.
How do I start scrap booking? ›- Gather your scrapbook journal supplies.
- Think about a theme or a concept.
- Jot down some topics that you want to write about. ...
- Find photos that you want to scrapbook about.
- Browse Pinterest and Instagram for inspiration!
How do you add a scrap value in SAP? ›
- By assigning a scrap value key to the depreciation key used in the depreciation area.
- By entering an absolute scrap value in the asset master data for the depreciation area.
A scrapping schedule is used with a view to calculating the residual value as at the time the assets are being thrown away.
How do you record scrap value? ›Example of How to Use Scrap Value
Using the straight-line depreciation method, the annual depreciation per year will be 12% x $75,000 = $9,000. The residual amount that the company can get if it disposes of the machinery after eight years is as follows: Scrap value = $75,000 - ($9,000 x 8) = $3,000.
As mentioned above, the iron and steel scrap is essentially of three types (Fig 1) namely (i) internally generated scrap during the production of iron and steel and their products inside an integrated steel plant, (ii) new scrap, prompt, or industrial scrap which is generated during the processing of iron and steel ...
What is the highest paying scrap metal? ›Copper is King
For most scrappers, copper is the king of scrap metal because it gains as much as $2 to $4 per pound. When it comes to scrap metal, that's a pretty high amount, especially compared to other metals like aluminum or brass.
There are three main types of steel scrap which are used by the steel industry as feed stock. These are (i) internal scrap, (ii) prompt scrap, and (iii) obsolete scrap. Internal scrap is also known as revert or home scrap.
What is another name for scrap value? ›The scrap value definition, also known as salvage value, is the value of an asset after it is fully depreciated.
Can scrap value be positive or negative? ›Hence, the scrap value of the property may be both positive and negative. Important PointsSalvage value: Salvage Value is the Estimated Value of an asset without dismantling it at the end of its useful life.
What is the T code for asset scrap in SAP? ›To retire an asset by scrapping, we'll enter transaction code ABAVN.
Is sale of scrap a profit or loss? ›The sale value of scrap is credited to profit and loss account as other income. The unit cost of production is, therefore, inclusive of cost of scrap.
How do I make a scrap invoice in SAP? ›
Then the flow of scrap sales: 1)Create a scrap sales order (VA01) F 2) Scrap delivery (VL01N) 3) PGI (VL02N) 4) Performa invoice (F8) or sales Invoice (F2) (VF01) and 5) if excise is applicable for the scrap, then excise invoice (J1IIN) after sales invoice.
What are the categories of scrap? ›There are two main categories of metals: ferrous and non-ferrous. Metals that contain iron in them are known as ferrous. Metals without iron are non-ferrous. Common non-ferrous metals are copper, brass, aluminum, zinc, magnesium, tin, nickel, and lead.