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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,


  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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