Utilizing Scrap Factors

The use of the "Scrap %" field allows formulators to define the scrap percentage for items and thus define the material used to complete the job versus the final amount actually produced. For raw materials and subassemblies this defines the amount of material that must be issued to a job to get a usable quantity of 1 into the final assembly. For example, a material with 20% waste would have a scrap % of 20.00 materials while material with no scrap should be defaulted to a scrap % of 0.00.

In addition, the "Scrap Cost %" field is also available. This field defines the percentage of the item’s current material cost that will be used when rolling up to the standard material cost(s) for parent items. The “Roll up Material Costs From BOM” flag on the Item Master Properties tab for the parent part must be checked in order for the scrap cost % to be considered.

The "Scrap %" and "Scrap Cost %" fields are available on Bill of Material lines and on Item Master records. On the item master record, the fields are located on the "General 1" tab and on the Facilities tab. If specified only on the "General 1" tab, the system will use these values when issuing inventory on jobs for this part regardless of the facility used to produce the part. If specified on the "Facilities" tab, and the "Use Scrap and Over Issue" flag on the facility item is checked, the system will use these values when issuing inventory on jobs for this part in the specified facility, both in terms of costs and inventory issued. These fields may be defined on the "General 1" tab and the "Facilities" tab simultaneously. In this case, the facility entry acts as the exception to the value specified on the "General 1" tab.

The system adds the scrap % on the item master to the scrap % on the BOM line when calculating the total scrap % required during the production process. Like scrap %'s, scrap cost %'s can be defined on BOM lines as well. The system will add the scrap cost % on the item master to the scrap cost % on the BOM line in this case.

The inclusion of the "Scrap %" on the item master record allows formulators greater flexibility when using different formulas. Example, a raw material may consistently have a 10% scrap factor which is defined on the item master record. However, when this raw material is contained on different formula, the scrap % on the BOM line may vary depending on the manufacturing process, BOM or formula parameters.

Configuration

• Item master records and BOM revisions will need to be defined in the system.
• Scrap %'s and scrap cost %'s will need to be defined on the formula revision, the Item Master "General 1" tab, the item master "Facilities" tab, or a combination of these.
• Scrap factors should be a positive number, or zero if unused.

Process

Defining scrap % and scrap cost % on item master records

1. Navigate to Inventory > Item Master.
2. Select an appropriate item in the "Part Number" field.
3. Click the "Modify" button to display the "Edit Item Master" form.
4. On the "General 1" tab enter the appropriate values in the "Scrap %" and "Scrap Cost %" fields. See the Item Master page for information on all Item Master fields.
5. Once all appropriate information is entered, click the "Save" and "Exit" button to complete the process.

Defining scrap % and scrap cost % on item facilities

1. Navigate to Inventory > Item Master.
2. Select an appropriate item in the "Part Number" field.
3. Click the "Modify" button to display the "Edit Item Master" form.
4. On the "Facilities" tab, click the "Add" button to display the "Edit Item Facility" form.
5. Enter the appropriate values in the "Scrap %" and "Scrap cost %" fields. See the Item Master page for information on all Item Master fields.
6. Ensure the "Use Scrap and Over Issue" box is checked.
7. Once all appropriate information is entered, click the "Save" and "Exit" button to close the "Edit Item Facility" form.
8. Click the "Save", then "Exit" button on the "Edit Item Master" form to complete the process.

Defining scrap % and scrap cost % on bill of material revisions

1. Navigate to Inventory > Bills Of Material.
2. Select an appropriate item in the "Part Number" field.
3. Click the "View" button to display the Bills Of Material form.
4. Select the appropriate revision and click the "Modify" button to display the "Edit Bill of Materials" form.
5. Select the first BOM line/part that will have scrap %'s and scrap costs %'s defined and click the "Modify" button to display the "Edit BOM Line" form.
6. Add appropriate values in the "Scrap %" and "Scrap Cost %" fields.
7. Click the "Save" and "Exit" button to complete the process.
8. Repeat steps 5-7 for any additional lines/parts that will have scrap values.
9. Once all the appropriate information has been entered, click the "Save" and "Exit" buttons on the "Edit Bill of Materials" form to complete the process.

Examples

Example 1 - Use of scrap % for issued raw materials

1. Find a finished good that has a BOM containing, among other items, a quantity of one for a raw material. The quantity of the raw material required to make one of the finished good should be a 1 to 1 ratio.
2. Set that raw material to have an Item Master Scrap % 5.00, and clear the property checkbox “Don’t include for job issuing” so that it will be issued to the job.
3. Set the finished good to “Backflush BOM at job finish” on the item master property tab.
4. Create a job for a quantity of 100 of the finished good.
5. Issue materials to the job. The issue list should include 105 of the raw material (100 qty of FG * 1 RAW per FG * .05 scrap %).
6. Finish 100 qty of the finished good off the job, but don’t close the job.
7. All 105 of the raw materials should be gone from WIP, removed by the backflush on finish of the finished good. This can be verified by running the Inventory Reporting "History" Report Type with a view type of “WIP” for the Raw material. The report will show the 105 qty going into WIP during the issuing step and out during the job relieve step.

Example 2 - Use of scrap % for non-issued raw materials

1. Find a finished good that has a BOM containing, among other items, a quantity of one raw material. The quantity of the raw material required to make one of the finished good should be a 1 to 1 ratio.
2. Set the raw material to have an item master scrap % of 5.00, and check the property checkbox “Don’t include for job issuing” so that it will not be issued to the job.
3. Set the finished good to “Backflush BOM at job finish”.
4. Create a job for 100 qty of the finished good.
5. Issue materials to the job. The issue list should not include the raw material
6. Finish 100 qty of the finished good off the job, but don’t close the job. History of Inventory for the raw material should show that 105 were removed by the job finish, because of the backflush on finish of the finished good. This can be verified by running the Inventory Reporting "History" Report Type with a view type of “Inventory” for the raw material. The report will show the 105 qty going out of inventory during the relieve job.

FAQ & Diagnostic Tips

How are scrap cost percentages calculated and rolled up?

As indicated previously, "The “Roll up Material Costs From BOM” flag on the Item Master Properties tab for the parent part must be checked in order for the scrap cost % to be considered. Like scrap %'s, scrap cost %'s can be defined on item master records as well. The system will add the scrap cost % on the Item Master to the scrap cost % on the BOM line is this case. The result of the this calculation is placed in the current materials field (pr_stanmat) on the "Costs" tab of the parent item as specified on the bill of materials.

The calculation is as follows:

PR_STANMAT = ROUND(ROUND(STOCKQTY * STANDARDCOST * PRICINGFACTOR, PRICINGDECIMALS) / STOCKYIELD / PRICINGFACTOR, PRICINGFACTOR)

The list below provides details on the calculated variables referenced in the above calculation.

Note: The scrap cost is also used to calculate the weight cost and volume cost with a similar calculation multiplied by unit weight or unit volume respectively. The result of this calculation only affects costs and in no way impacts the actual weight or volume of the item.