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Author's profile photo Amit Anasane

Scrap management through SAP

Hi Friends,

The basic purpose of this blog post is to share the way to manage scrap generated in a discrete manufacturing industry for below said scenarios, as some companies prefer to make scrap management & accounting from of SAP. hope this will be helpful.

Scenario 1 :- scrap generated during manufacturing ( production line rejections)

Scenario 2 :- scrap generated at subcontractor (for Indian scenario)

Scenario 3 :- supplier returns (scrap handling)

Scenario 4 :- customer returns (scrap handling)

All scenario required a seperate scrap location which is excluded from MRP area,

Detailed Process Description:-

Scenario 1 :- Production line rejection is generated at the time of production, so confirming the scrap at the time of production order confirmation in transaction Co11N,

Enter raw material/semifinished material (whichever has been detected as scrap) and scrap qty 2 pcs for example, Scrap location & movement type 531 and choose save.

After saving the ok qty will flow in usable stock and the scrap qty will flow in scrap location as a receipt by-product.

GI for scrapping the material:- Now we need to make goods issue of material which are confirmed to be scrapped from the system.through transaction MB1a Movement type 551- GI for scrapping plant & scrap storage location and for material which refers to perticular profit center as per product hierarchy.

Scenario 2 :- scrap generated at subcontractor (for Indian scenario)

Subcontracting scrap :- ,

  1. Make transfer posting through transaction MB1B Movement type 542, from vendor stock to stor. loc. S210, and reconsile challan later with the material document created from 542 movement.
  2. Make GI posting through MB1A & Mov. Typ. 551 same as explained previously.

Scenario 3 :- supplier returns (scrap handling)

Supplier return :- Material received from vendor with poor quality standards (rejections,scrap etc.), 

  1. Make transfer posting through transaction MB1B Movement type 321 from quality inspection to stor. Loc. or if already transferred to storage location, then transfer it to scrap location through 311,
  2. make a Return purchase order.
  3. Follow Goods return note–> exsice invoice (J1IS)–>MIRO (Credit note)

Scenario 4 :- customer returns (scrap handling)

Customer return :- Material received from customer,

Material flow should be Return sales order –>Post goods return delivery in –> billing document –>Excise JV(Trans – J1IH), now remove stock of FG through MB1Aà Mov. 551 from storage location.

  1. Rework of FG:- Material replaced under rework of finished components should be first transferred to scrap location through MB1B –>Mov.311 and then scrapped through transaction MB1A–> Mov.551 from scrap stor. Loc. 
  2. Use- up ok parts:- Componenet of FG material found ok after quality inspection should be received in system through MB1C–> Mov. 501. to storage location

By this methods we can get below advantages/benefits,

Benefits

  1. Generate scrap report for line rejections with values from transaction MB51
  2. Identify defected raw materials for further analysis
  3. Identify vendors with most defective raw material supplies
  4. Inventory management improvement

Many thanks,

Amit Anasane

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      30 Comments
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      Author's profile photo Preeti Kashyap
      Preeti Kashyap

      Very Useful scenario u have described here. These are important in manufacturing companies.

      Thanks for sharing a good knowledge.

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      many thanks for your appreciation

      Author's profile photo Former Member
      Former Member

      Good Blog, Brief Explanation Nice 🙂   for Sharing it.

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      thanks Shiva 🙂

      Author's profile photo Dibyendu Patra
      Dibyendu Patra

      Hi Amit Anasane

      Nice explanation...

      Keep it up...

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      Many thanks Dev 🙂

      Author's profile photo PRASOON AK
      PRASOON AK

      Hi Amit,

         Simple and nice presentation... 🙂

         But I have one doubt related to subcontract scrap with CIN...If we are scrapping, will it clear the excise details also? Will it create any issue while doing quantity reconciliation.

      Regards,

      AKPT

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      Hi AKPT,

      many thanks for your appreciation and thanks for a valid point, for subcontracting scrap, after reconciliation of challn in J1ifq with reference to material doc posted from MB1b & 542 move, you can recredit the cenvat from J1if13. also it possible to make a manual adjutment through a FI entry.

      with best regards,

      Amit Anasane

      Author's profile photo Former Member
      Former Member

      Hi Amit,

      Firstly, thanks for spending your valuable time. Its very nice and clear presentation. A request from my side. It would be great if you can share some screenshots for the same or what are the documents that get generated.

      Best Regards

      Sesha..

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      Thank Sesha,

      i will sure share the screen shot with another revision of this blog 🙂

      with best regards,

      Amit Anasane

      Author's profile photo Mehmet Ozgur Unal
      Mehmet Ozgur Unal

      Hi all ;

      Thanks for your clear presentation.

      I want to add a sentence , i saw last days

      ''The consumption data isnt updated in material master record in case of movement types for scrapping and sampling. ''

      Regards.

      M.Ozgur Unal

      Author's profile photo PRASOON AK
      PRASOON AK

      Hi,

         The consumption update will happen only if the consumption update indicator is maintained in movement type config. For 551, it is not maintained in standard.

         You may check the same in OMJJ transaction.

      Regards,

      AKPT

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      Thanks Mehmet Ozgur Unal for a valid question & thanks to AKPT MM for solution, i have also leanrt a new thing from it.

      regards,

      Amit Anasane

      Author's profile photo saurabh awasthi
      saurabh awasthi

      Hi thanks for very good documents.....

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      thanks Saurabh 🙂

      Author's profile photo Shiva Vasireddy
      Shiva Vasireddy

      Thank you for the good document

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      Thanks Siva for your comment.

      Author's profile photo Binoy Vargis
      Binoy Vargis

      Informative. This was a piece of information i wanted.

      thank you for sharing.

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      thanks Binoy, 🙂

      Author's profile photo Former Member
      Former Member

      ready reference for scrap management. It is like a pocket book for many scenarios. Good one...

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      many thanks Lakhya Pratim Baruah, i am happy that this post was helpful for your reference 🙂

      Author's profile photo Former Member
      Former Member

      Hello Amit,

      Thanks for the useful document. I have a question for the first scenario:- we make GI for issuing scrap material, but can you throw some light on excise document which is required if we want to remove it from our factory premises to be sold to a scrap vendor.

      regards,

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      Hi Hussain,

      in case of selling scrap to supplier(may be a scrap purchasing one), i would suggest it should be same process as of normal sale, may be you need to create some material codes specifically for selling the scrap material, for example steel scrap, aluminum scrap etc. and sales order with all excise duties applicable, than you need to create a invoice and sale the scrap to him. 

      Regards,

      Amit Anasane

      Author's profile photo Former Member
      Former Member

      Hi Amit,

      Thanks for your response!

      regards,

      Hussain

      Author's profile photo Former Member
      Former Member

      Hi Amit,

      If general material is created like MS Scrap, Aluminum Scrap, Steel Scrap, how will we generate stock for these materials. A very generic question - but will add one further process to your initial document. 🙂

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      Hi Lakhya Pratim Baruah,

      i could suggest, you can generate stock through movement 501 - Receipt w/o PO. in scrap location and then can sale it. many thanks

      Regards,

      Amit Anasane

      Author's profile photo Former Member
      Former Member

      Thanks for sharing this helpful bog Amit.

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      Thanks very much Abdulla 🙂

      Author's profile photo Sanjay Ram
      Sanjay Ram

      Hi,

      How can we post scrap which is without quantity. This is more of a devaluation of the process order costs where the total consumption of the process order is $100, however due to some loss of oil, the total consumption value of the process order is now only $80 where $20 dollars is for scrap loss.

      How can we capture this scrap loss to be booked to a P&L account without GR of any scrap quantities directly from the process order? However the total output quantity of the process order should remain intact and be posted to the planned output product.

      In other words, i want to scrap only the value part and not the quantity part.

      Author's profile photo Amit Anasane
      Amit Anasane
      Blog Post Author

      Hi Sanjay,

      sorry for the delay in reply, i think its better if you could ask this question on the discussion  Forum, at moment i only know that whenever you post scrap entry in accounting perspective its always debit to material goods ledger and credit to FI goods ledger. however in your case you don't want to reduce material quantity only wants to give a FI posting to appropriate G/l, in this case i am not so expert 😐 and could be answered by FI person.

      Regards,

      Amit Anasane