Scrap Management in Odoo 18 Manufacturing
By Braincuber Team
Published on January 15, 2026
In manufacturing, waste is inevitable—whether it's off-cuts, defects, or damaged raw materials. However, how you manage that waste defines the efficiency of your operation. Are you tracking scrap costs? Do you know which workstation produces the most defects? Can you instantly account for damaged stock?
Odoo 18's Scrap Management feature turns waste tracking from a headache into a precise accounting process. By setting up dedicated virtual scrap locations and integrating scrap orders directly into the manufacturing workflow, you can isolate damaged goods, remove them from stock valuation, and maintain perfect inventory accuracy. This guide walks you through configuring scrap locations, creating standalone scrap orders, and managing defective components during live manufacturing operations.
Scrap Management in Odoo 18: A built-in feature to track damaged, expired, or defective products. Moves items to a virtual "Scrap Location" (Inventory Loss), removing them from stock value while keeping a record. Supports standalone scrap orders and on-the-fly scrapping during Manufacturing Orders.
Why Manage Scrap?
Accurate Valuation
Remove damaged goods from asset value so your financial reports reflect true inventory worth.
Traceability
Keep a permanent record of what was scrapped, when, why, and by whom.
Process Improvement
Identify high-waste products or workstations to target quality control improvements.
Inventory Hygiene
Physically and digitally separate usable stock from waste to prevent production errors.
Configuring Scrap Locations
Enable Storage Locations
- Go to Inventory → Configuration → Settings
- Scroll to Warehouse section
- Ensure Storage Locations is checked
- Click Save
Create Scrap Location
- Go to Inventory → Configuration → Locations
- Click New
- Location Name: Scrap (or specific name like "Metal Scrap")
- Parent Location: Virtual Locations
- Location Type: Inventory Loss
- Check box: Is a Scrap Location
LOCATION SETUP FOR SCRAP ═══════════════════════════════════════════════════════════ Location Name: Scrap Zone A Parent Location: Virtual Locations Location Type: Inventory Loss Is Scrap Doc: [✓] Enabled WHY VIRTUAL LOCATIONS? ─────────────────────────────────────────────────────────── Using "Virtual Locations" as the parent ensures that items moved here are considered "out of stock" for valuation purposes, but the movement history remains preserved in Odoo.
Creating a Scrap Order
You can scrap items directly from inventory (e.g., finding a damaged box in the warehouse) without linking it to a manufacturing order.
Create New Order
- Navigate to Manufacturing → Operations → Scrap
- Click New
Fill Details
- Product: Select item to scrap
- Quantity: Enter amount
- Source Location: Where the item currently is (e.g., Warehouse/Stock)
- Scrap Location: Where it goes (e.g., Virtual Locations/Scrap)
Validate
- Click Validate button
- Status changes to Done
- Product is removed from stock
Scrapping During Manufacturing
The most common scenario is discovering a defect during production (e.g., a table leg cracks while assembling). Odoo lets you scrap components directly from the Manufacturing Order (MO).
SCRAPPING IN MANUFACTURING ORDER ═══════════════════════════════════════════════════════════ SCENARIO ─────────────────────────────────────────────────────────── You are assembling a Table. One "Table Top" component is scratched during assembly. You need to discard it and consume a new one. WORKFLOW ─────────────────────────────────────────────────────────── 1. OPEN MANUFACTURING ORDER Go to Operations → Manufacturing Orders Open the active order (Status: In Progress/Confirmed) 2. CLICK SCRAP BUTTON Look for the "Scrap" button (usually top left or under Settings icon ⚙️) 3. CONFIGURE SCRAP POPUP Product: Table Top (Auto-filled or select component) Quantity: 1 Lot/Serial: Select exact serial if tracked Source Loc: WH/Pre-Production Scrap Loc: Virtual Locations/Scrap 4. CONFIRM SCRAP Click "Scrap Products" 5. RESULT • The damaged Table Top is moved to Scrap. • The MO remains open. • You can now consume a NEW Table Top to finish production. • Cost of scrapped item is recorded but not part of finished product value (depending on costing method). VIEWING SCRAP HISTORY ─────────────────────────────────────────────────────────── From the Manufacturing Order: • Click "Scraps" smart button at the top. • Shows list of all items scrapped against this specific MO.
Analyzing Scrap Data
Reporting is where the value lies. Use Product Moves to audit where your inventory went.
View Product Moves
- Open any Scrap Order
- Click Product Moves smart button
- See the specific stock move: WH/Stock → Virtual/Scrap
Cost Analysis
- Go to Inventory → Reporting → Stock Moves
- Filter by Destination Location: Scrap
- Group by Product or Date
- Insight: See total value lost to scrap this month.
Best Practices
✅ Scrap Management Best Practices:
- Categorize Scrap Locations: Use different locations for different failure modes (e.g., "Scrap - Raw Material", "Scrap - Production Defect") for better analysis.
- Require Reasons: Add a custom field or use notes to explain why something was scrapped.
- Review Weekly: Check reports to identify recurring defects in specific products.
- Segregate Physically: Ensure your physical "Scrap Bin" matches your digital "Scrap Location" to prevent accidental use.
Common Mistakes to Avoid:
- Deleting instead of Scrapping: Never just adjust inventory down without a record; always use Scrap Orders for traceability.
- Using "Inventory Adjustment": While possible, it lacks the specific "Scrap" cost accounting context.
- Ignoring Value: Remember that scrap items still had purchase cost; ignoring scrap distorts your Cost of Goods Sold (COGS).
Conclusion
Odoo 18's Scrap Management is a vital tool for any manufacturing or inventory-heavy business. It provides a clean, auditable way to handle the reality of damaged goods without messing up your main stock records. Whether you are finding a broken item on the shelf or dealing with a production error on the assembly line, the Scrap workflow ensures that every item is accounted for, costs are allocated correctly, and your inventory valuation remains pristine. Start using dedicated scrap locations today to gain true visibility into your material losses.
🎯 Key Takeaway: Enable Storage Locations → Create "Inventory Loss" location → Use "Scrap" button in Manufacturing Orders. This ensures accurate inventory valuation and complete traceability of waste.