To handle scrap and by-products in ERPNext, you add them to the BOM's scrap items with a rate, set a scrap warehouse, and confirm the actual scrap on the manufacture entry when a Work Order finishes. For expected loss, you set the BOM's process loss, or carry the extra raw material in the BOM quantities. That keeps both stock and costing accurate.
Every production line loses material (offcuts, trimmings, filings, spillage) and some lines make saleable by-products. If ERPNext doesn't account for them, two things break: stock overstates raw material, and the finished-goods cost is wrong. Handling scrap properly is less about the scrap and more about accurate cost and stock.
Scrap in ERPNext is a costing decision, not a warehouse afterthought. Recorded scrap either lowers finished-goods cost (if it has value) or documents expected loss (if it doesn't); either way it makes your numbers honest. I am Manoj, and I lead ERPNext and Frappe implementations at MithTech, a team of Frappe specialists in Bengaluru. This guide explains the options.
How do I add scrap or by-products to a BOM in ERPNext?
Enter them in the BOM's scrap items table, each with a quantity and a rate. The rate tells ERPNext the scrap has value (a recyclable offcut or a saleable by-product), and that value comes off the cost of the finished goods made from the BOM. Scrap with no value can be entered at a zero rate to record the quantity.
This works when the scrap is predictable per run, such as metal filings from machining or fabric offcuts from cutting. The scrap items sit in the BOM beside the raw materials, so every Work Order made from it knows what by-products to expect.
Skimmable summary: add scrap to the BOM's scrap items with a quantity and rate. A rate lowers finished-goods cost (saleable by-product); a zero rate just records the quantity (pure wastage).
What is the difference between the scrap warehouse and process loss?
The scrap warehouse is where recovered scrap goes as stock: when the manufacture entry is made, the BOM's scrap items are added at their planned quantity, and you correct them to what really came off the line. Process loss is the quantity that simply disappears in the process; the BOM's "% Process Loss" lowers the expected output for the material issued. One records what came out; the other plans for what you lose.
| Feature | Scrap warehouse | Process loss |
|---|---|---|
| Purpose | Store and value recovered scrap | Account for material that is lost |
| When it applies | On the manufacture entry | In the BOM and on the manufacture entry |
| Effect | Adds scrap to stock and lowers cost | Lower output for the same material, so a higher cost per unit |
| Best for | Saleable or recyclable by-products | Predictable yield loss |
Use both where they apply: process loss for the yield you lose, the scrap warehouse for the part you recover. If you want planning to issue extra raw material for wastage instead, put the higher quantity on the BOM line. ERPNext v15 has no separate scrap percentage per BOM line. Process loss recorded on a Job Card has had its own issues; see Job Card process loss.
Skimmable summary: the scrap warehouse holds recovered scrap as valued stock; % Process Loss accounts for yield you lose. Use both, and put extra raw material on the BOM line if planning must issue it.
How does scrap affect finished-goods cost in ERPNext?
Scrap with a value lowers the finished-goods cost, because its value is netted against the production cost. If a run consumes ₹100 of material and produces ₹10 of saleable scrap, the finished goods carry about ₹90 of material cost rather than ₹100. Pure wastage stays in the cost: the lost material is simply consumed.
That is why the rate on scrap items matters. Set it accurately and the finished-goods cost reflects reality; leave it at zero for valueless waste and the cost absorbs the loss, as it should. Scrap is a lever on costing accuracy, which is why I cover it beside the finished-goods costing guide.
Skimmable summary: saleable scrap nets against production cost and lowers finished-goods cost; pure wastage stays in it. The scrap rate is the lever.
When should I not model scrap in ERPNext?
When the amount is immaterial, irregular, or not worth the entry. Scrap items on every Work Order cost operators time, and for negligible or unpredictable waste that outweighs the accuracy. The goal is honest numbers, not tracking every gram.
Model scrap where it matters to cost or the by-product is saleable: machining, textiles, food processing, metal fabrication. Skip it where waste is trivial, or a periodic stock adjustment is enough. Decide BOM by BOM which ones need it, so operators aren't burdened for nothing.
Skimmable summary: skip scrap modelling when the amount is immaterial or irregular; model it where scrap matters to cost or is saleable, and use periodic stock adjustments for trivial waste.
Frequently asked questions
+How do I add scrap items to a BOM in ERPNext?
Enter the scrap or by-product items in the BOM's scrap items table, each with a quantity and a rate. A rate tells ERPNext the scrap has value and nets it against finished-goods cost; a zero rate records the quantity of valueless waste. Every Work Order made from that BOM then expects that scrap.
+How do I record actual scrap during production?
Set a Default Scrap Warehouse in Manufacturing Settings, or a scrap warehouse on the Work Order. When you make the manufacture entry, the BOM's scrap items are added at their planned quantity into that warehouse; change the quantity to what really came off the line before you submit. The scrap is then valued stock you can sell or reuse.
+How do I plan for wastage in an ERPNext BOM?
Use the BOM's "% Process Loss" for yield you lose in the process, which lowers the expected output for the material issued. If you want planning to issue extra raw material instead, put the higher quantity on that BOM line. ERPNext v15 has no separate scrap percentage per line.
+Does scrap reduce my product cost in ERPNext?
Scrap with a value reduces finished-goods cost because its value is netted against production cost. Pure wastage doesn't reduce cost: the lost material stays in the finished goods. The rate you set on the scrap item decides it.
+Can ERPNext handle saleable by-products?
Yes. A saleable by-product is a scrap item with a realistic rate, received into a scrap warehouse as stock, then sold like any other item. ERPNext nets its value against the finished-goods cost and lets you invoice it separately. This suits metal fabrication, food processing and textiles.
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Manoj · Published on 11 July 2026
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