Definition
Scrap management is the controlled handling of material that has lost its intended economic or technical usability, from identification and segregation through authorization, disposal and realization.
Scrap-control principleIdentify → Segregate → Classify → Record → Authorize → Store → Dispose → Realize → Reconcile
Objectives
- Prevent usable material from being wrongly classified as scrap.
- Control scrap accumulation and storage space.
- Maintain quantity and value records.
- Maximize authorized realization value.
- Prevent unauthorized removal or sale.
- Maintain environmental, safety and statutory controls where applicable.
- Reconcile scrap generation with disposal and proceeds.
Scrap Categories
| Category | Examples |
|---|---|
| Metal scrap | Cuttings, rejected metal, obsolete components |
| Electrical scrap | Damaged cables, obsolete electrical components |
| Packaging scrap | Wood, cardboard, plastic packaging |
| Rubber scrap | Worn belts, seals and rubber parts |
| Chemical / hazardous | Material requiring special handling and disposal |
| Obsolete inventory | Stock no longer economically or technically usable |
Workflow
- Identify potential scrap.
- Confirm technical usability or obsolescence status.
- Segregate physically.
- Classify and weigh/measure where appropriate.
- Record item, quantity, source and reason.
- Obtain disposal authorization.
- Store in controlled scrap area.
- Conduct approved disposal or sale.
- Record realization and accounting documents.
- Reconcile quantity, proceeds and records.
Scrap Controls
- Use clearly identified scrap locations.
- Prevent mixing of hazardous and ordinary scrap.
- Maintain weighing evidence where applicable.
- Require authorization before disposal.
- Control access to scrap storage.
- Track high-value metal and recoverable material separately.
- Review abnormal scrap generation by department or process.
Common Errors
- Scrapping usable material without technical confirmation.
- Leaving scrap outside controlled areas.
- Mixing different categories that affect realization value.
- Disposing without authorization.
- Not reconciling scrap generation with production or maintenance records.
- Failing to account for disposal proceeds.
KPIs
Scrap Generation
Quantity/value generated relative to activity.
Scrap Realization
Actual proceeds relative to expected/approved value.
Scrap Ageing
Time material remains before disposal.
Recovery Rate
Recoverable material successfully returned to useful inventory.
Excel / MIS Application
Track Scrap No., Date, Source Department, Item/Material, Category, Quantity, Weight, Reason, Book Value, Estimated Value, Approval, Disposal Date, Buyer/Vendor, Realization and Accounting Reference.
Related Areas
Stores Management · Inventory Management · Purchase Management · Material Planning · ERP & MIS