Scrap management plays a critical role in modern inventory operations. Every manufacturing company, distributor, retailer, or warehouse eventually deals with damaged products, expired goods, production rejects, or defective materials. Without a structured process, these unusable items can distort inventory records, increase operational costs, and reduce profitability. Fortunately, Odoo 17 Inventory provides a streamlined scrap management system that helps businesses record, monitor, and account for inventory losses with complete accuracy.
Whether products become damaged during purchasing, manufacturing, internal handling, or customer returns, businesses must remove them from available stock while maintaining accurate inventory valuation. Odoo 17 simplifies this entire workflow by allowing organizations to move defective products into a dedicated scrap location, automatically update inventory quantities, and create accounting entries whenever automated inventory valuation is enabled.
Effective Scrap Management in Odoo 17 not only improves warehouse accuracy but also helps companies reduce waste, strengthen inventory control, and make better purchasing decisions. Moreover, managers can analyze scrap trends to identify recurring quality issues, supplier problems, production defects, or warehouse handling errors. As a result, businesses can improve operational efficiency while lowering unnecessary inventory losses.
In this comprehensive guide, you will learn how to configure scrap locations, create scrap orders, update inventory, automate accounting entries, and maintain accurate inventory valuation using Odoo 17 Inventory Management.
Why Scrap Management is Important in Odoo 17
Every business aims to maximize the value of its inventory. However, damaged, expired, broken, or unusable products are unavoidable. Instead of manually adjusting stock quantities, businesses should maintain a proper audit trail of inventory losses.
Implementing scrap management in Odoo 17 offers several business benefits:
- Maintains accurate inventory records
- Prevents stock discrepancies
- Improves warehouse visibility
- Reduces inventory carrying costs
- Supports automated accounting
- Simplifies stock valuation
- Improves quality control reporting
- Helps identify recurring production defects
- Enhances purchasing decisions
- Supports inventory audits and compliance
More importantly, proper scrap tracking allows organizations to distinguish between normal inventory consumption and unexpected losses. This visibility helps management improve operational performance over time.
What is Scrap in Odoo 17?
Scrap refers to products that can no longer be sold, used, or manufactured because they have become damaged, defective, expired, or unusable.
Instead of deleting inventory quantities manually, Odoo moves these products into a dedicated Scrap Location. Consequently, the warehouse stock remains accurate while every inventory movement stays traceable.
Typical examples include:
- Broken products received from suppliers
- Manufacturing defects
- Damaged warehouse inventory
- Expired products
- Customer returns that cannot be resold
- Quality control failures
- Packaging damage
- Lost inventory
Since Odoo records every scrap transaction, businesses always know why inventory decreased and when the loss occurred.
How Scrap Works in Odoo 17
Odoo follows a structured inventory workflow.
Rather than removing inventory directly, the system transfers products from an internal stock location to an Inventory Loss (Scrap Location). This approach maintains complete traceability while preserving inventory history.
If automated inventory valuation is enabled, Odoo also creates accounting journal entries automatically. Therefore, inventory valuation remains synchronized with financial records without requiring manual bookkeeping.
How to Manage Scrap in Odoo 17
Scrap can result from defects or substandard products. By reducing scrap, a company can optimize its use of resources and improve overall cost efficiency. Keeping track of scrap helps maintain accurate inventory records. This is crucial for inventory management and ensures that the company has a clear understanding of its available resources, preventing overstock or stockouts.
Effective scrap management using the Odoo ERP System helps control costs by minimizing the amount of raw materials, components, or finished goods that are wasted. Users of Odoo can identify a specific area in the inventory as being reserved for things that have been trashed. Before the items are taken out of the inventory permanently, this place serves as a transitional stage. Items that are designated as scrap can be moved to the Odoo inventory’s scrap location.
To execute the entire process of Scrap Management in the Odoo 17 Inventory system, we need to undergo certain steps.
Step 1: Activation of Storage Locations Feature
For setting up of Storage Location in Odoo 17, follow the path below:
Inventory Application => Configuration Menu => Settings => Warehouse Section => Storage Locations => Save
The location of products in inventory can be managed by activating this feature.
Step 2: Create a Scrap Location
We can go to the ‘Locations’ window to define a location as a scrap location either by directly navigating to the ‘Locations’ option just below the ‘Storage Locations’ setting or by selecting the ‘Locations’ option in the ‘Configuration’ menu of the ‘Inventory’ application.
We can either create a new location in Odoo 17 Inventory to define it as a scrap location by selecting the ‘New’ option or edit an existing location.
In the ‘Location’ form, enter details such as Location Name, Parent Location, Location Type, Company, Removal Strategy, Incoming and Outgoing Stock Valuation Account, etc. Here, we need to specify the Location Type as ‘Inventory Loss’ since the storage area handles the scrapped products in Inventory. We also need to activate the ‘Is a Scrap Location’ option by selecting the checkbox. After entering essential details, ‘Save’ the created location.
Let us discuss now the process of executing the scrap procedure with the help of an example. Suppose, we have purchased 15 Table Legs from a Vendor and found that 3 of them are broken. We need to send the 3 broken Table legs to the Scrap location and record the same in the Accounting system.
Step 3: Creating Purchase Order
Purchase Application => Orders menu => Purchase Order
Add the vendor and the product with the desired quantity to purchase in the Purchase Order and confirm the order by selecting the ‘Confirm Order’ option.
On confirming the Order, the status of the order is changed from ‘RFQ’ to ‘Purchase Order’ and the ‘Receipt’ smart button appears at the top. Next, we have to receive the ordered quantity of products from the vendor and validate the received products. Select the ‘Receive Products’ option to receive the products in the purchase order.
Click on the ‘Validate’ button after verifying that all the ordered products in the purchase order have been received. The status of the receipt changes from ‘Ready’ to ‘Done’.
Now, the ordered quantity of the product has been received and is currently in our inventory. To view the product in the Inventory, follow the path below:
Inventory Application => Operations Menu => Adjustments Section => Physical Inventory
The received 15 units of Table Legs can be seen in the ‘Inventory Adjustments’ window. Now, we want to move 3 of the damaged Table legs from stock to the scrap location.
Step 4: Creating a Scrap Order
For that, select the Receipt from the Inventory Dashboard. In the Receipt, click on the ‘Action’ button at the top and select the ‘Scrap’ option.
A pop-up window appears in which we need to select the product to scrap in the order and specify the quantity of scrapped product. After that, select the ‘Scrap Products’ option.
On returning the delivery order, we can see the scrapped products as separate products in the ‘Operations’ tab. Two smart buttons such as ‘Scraps’ and ‘Detailed Operations’ appear at the top.
Select the ‘Scrap’ smart button to view the Scrap Order created.
On selecting the scrap order once again from the window, we get a more detailed view of the same.
In the Scrap Order, details such as Product, Quantity, Owner, Source Location, Scrap Location, Source Document, Date, Picking, Company, and Replenish Quantities can be specified. We also have two smart buttons in the scrap order such as ‘Stock Operation’ and ‘Product Moves’. The ‘Stock Operation’ smart button shows the transfer of scrapped products including details such as Reference document, From area, To area, Contact, Scheduled date, Source document, Batch Transfer, Company, Status, and so on.
Select the ‘Product Moves’ smart button that displays the moves history of the scrapped products.
The scrapped products, 3 units out of the 15 units of Table Legs received are moved from warehouse stock to the scrap location.
Now when you check the inventory by going to the ‘Inventory Adjustments’ window, the quantity of Table Legs is updated.
Accounting Practices in Odoo 17 Scrap Management
When storable products are added to or removed from your stock and transported to a virtual location, Odoo will create journal entries for stock movement. Here, if the required configurations were made before the transfers took place, shifting storable stock to a virtual scrap site will result in stock movement log entries in Accounting.
Step 5: Activation of Automatic Accounting for Stock Movements
To enable the setting, follow the path below:
Accounting Application => Configuration Menu => Settings => Stock Valuation Section => Automatic Accounting => Save
The fields provided under the ‘Automatic Accounting’ setting allow you to specify the accounts that are utilized for automatic inventory valuation. It includes a Stock Valuation Account, Stock Journal, Stock Input Account, Stock Output Account, and Production Account.
Step 6: Automating Inventory Valuation in the Product Category form
Now, you must correctly configure the product category to start the inventory valuation automatically. For that, let us first go to the Product form of the scrapped product to go to its product category form.
Inventory Application => Products Menu => Products => Table Leg (Here) => General Information Tab
We can go to the Internal link of the product category of the scrapped product in the ‘Product Category’ field. Select the product category field to go to its product category form through an internal link.
This is where you can choose Automated Inventory Valuation. When a product enters or exits the stock, this will immediately cause an accounting record to be generated to modify inventory. You can save the modifications after naming the accounts for your stock movements.
Now, whenever a change in the stock that belongs to the Product Category (here, ‘All’) happens, the journal entries will be posted automatically in the respective accounts specified in the product category form.
We can also specify the accounts for the change in inventory of a particular location. As we are discussing about Scrapping of products, we can see that in the Scrap Location. In the Accounting Information section of the Scrap Location form, we can specify Incoming Stock Valuation Account and Outgoing Stock Valuation Account. When shifting stock between an internal location and a scrap site, this will cause journal entries related to stock movement. To check this, follow the path below:
Accounting Application => Accounting Menu => Journal Entries
As soon as three units of the product ‘Table Leg’ are moved to the scrap location, a new journal entry appears.
In summary, managing scrap in inventory is essential for cost control, profitability, resource optimization, environmental sustainability, production efficiency, and maintaining positive relationships with both customers and suppliers. It is a strategic aspect of overall inventory and production management that contributes to the long-term success of a business.
Odoo ERP system helps businesses manage all their inventory operations through automated and streamlined solutions. Check out other blogs from Infintor Solutions, a trusted Official Odoo ERP Partner to know how Odoo software can help your business improve its operations.
Best Practices for Managing Scrap in Odoo 17
While Odoo makes scrap management simple, businesses can achieve even better results by following a few best practices. First, always create dedicated scrap locations instead of using general inventory adjustment methods. This approach keeps warehouse records organized and improves inventory traceability.
Next, encourage warehouse teams to record scrap immediately after identifying damaged or defective products. Delayed recording often creates stock mismatches and inaccurate inventory reports.
Additionally, businesses should review scrap reports regularly. Frequent analysis helps identify recurring supplier issues, production defects, transportation damage, or improper warehouse handling. Once these patterns become visible, management can take corrective actions to reduce future losses.
Organizations should also integrate Quality Control with Inventory Management in Odoo. Products that fail inspection can move directly to the scrap location without unnecessary manual intervention. This workflow saves time while improving inventory accuracy.
Finally, enable automated inventory valuation whenever possible. Automatic accounting minimizes manual bookkeeping, reduces accounting errors, and ensures financial reports always match warehouse operations.
Business Benefits of Scrap Management in Odoo 17
Using the Scrap Management feature in Odoo 17 delivers advantages beyond simple inventory adjustments. Businesses gain greater control over inventory, improve warehouse transparency, and strengthen financial reporting.
Some major benefits include:
- Better inventory accuracy across warehouses
- Improved inventory valuation
- Complete traceability of damaged products
- Faster warehouse operations
- Automated accounting entries
- Reduced manual stock adjustments
- Improved purchasing decisions
- Better supplier performance analysis
- Lower inventory losses
- Enhanced audit readiness
- Improved production planning
- Better inventory forecasting
As organizations grow, these improvements contribute directly to higher operational efficiency and better profitability.
Conclusion
Scrap management forms an essential part of every successful inventory operation. Even though damaged products cannot always be avoided, businesses can control their financial impact through proper inventory processes. Odoo 17 provides a reliable and user-friendly solution for managing scrap, maintaining accurate stock levels, and automating accounting entries.
By configuring storage locations, creating dedicated scrap locations, recording scrap orders, and enabling automated inventory valuation, organizations can maintain complete visibility over inventory losses while reducing manual work. Furthermore, regular analysis of scrap data helps businesses improve quality control, optimize purchasing decisions, and minimize future waste.
Whether you manage manufacturing, wholesale distribution, retail operations, or warehouse logistics, Scrap Management in Odoo 17 helps you maintain inventory accuracy, improve operational efficiency, and strengthen financial control.
If you are planning to implement or customize Odoo 17 Inventory Management, the experts at Infintor Solutions, an Official Odoo Partner, can help you streamline warehouse operations, automate inventory workflows, and maximize the value of your ERP investment.