Dynamics GP Manufacturing - SCRAP FAQ

Methods for tracking scrap in Dynamics GP

First, we will define the different types of scrap, and the best ways to track each type in Dynamics GP Manufacturing.
RM-Raw Materials
FG-Finished Goods
We will use Bread as a simple example.
Flour, Salt, Yeast, Water = Bread

• Manufacturing Constants
• Once RM is issued to an MO, it will be included in the cost of the FG, even if it is scrapped
• Component Transaction - Scrap Transaction
• Adds the cost of the item to the MO, but does not add the quantity.
• You cannot create a scrap transaction unless you have posted an issue transaction (The stock is not there to be scrapped)
• You cannot create a scrap transaction if you have used all of the raw materials issued to an MO via FG receipts
• Entering a value in the "Backflush Qty to Scrap" in the component detail of the MFG Receipt window does not affect anything. 
• This field is for informational purposes only.
• If you had to issue more material to replace the scrap to complete production, you must do this manually
• By Products - The cost of the by-product item is whatever the current cost is of the item on the item master
• The cost is COMPLETELY UNRELATED to the costs of production
• However, the Cost of the By-Products will consume cost away from the original FG
• Example - Bread usually costs $10. However, we can make Breadsticks as a by-product, with a current cost of $1. 
• If I do an MO for 1 bread and receive 1 bread with no by product, it will have a current cost of $10
• If i do an MO for 1 bread and receive 1 bread AND 5 Breadsticks, the bread will go in at a cost of $5 and each breadstick goes in at $1 (based on the current cost in the item master)
• Cost of FG = Cost of Raw Materials and other inputs - Cost of By Products

• Raw Material Scrap (RM Scrap)
• This is Raw Material that is spilled or scrapped after it has been issued to the MO, but before it actually gets turned into anything
• Example-A Worker starts measuring out ingredients to put into the mixer, and he drops a bag of flour and it spills all over the floor.
• Generally at this point, RM is still in separate components, and the scrap can be measured
• If you want to Include these costs in your FG, and just track scrap quantities - 
• Create a Scrap Component Transaction OR Enter the quantity in the backflush quantitiy to scrap field if backflushing
• Issue more raw material to compensate for what was scrapped if additional material was used, OR increase the backflush component qty used to compensate for the qty scrapped if backflushing
• If you do not want to include these costs in your FG, but still want to track the scrap -
• Create a Reverse Issue Transaction to return RM back to the original location, then do an inventory adjustment to remove it from stock, and change the distributions to send it to a scrap account. Enter the MO number in the Batch field to tie the inventory adjustment to the MO. A Manual report will have to be created to link the transactions.
• If you are backflushing, do not change the default qty to backflush, and simply do an inventory adjustment for the raw materials that should be scrapped and change the distributions to send it to a scrap account. Enter the MO number in the Batch field to tie the inventory adjustment to the MO. A Manual report will have to be created to link the transactions.
• Work In Process Scrap (WIP Scrap)
• This is Raw Materials that have already begun processing, and are in a state where they cannot be separated or measured separately, but are also not completed 
• Example - After the components have been mixed into dough, and then a piece falls on the floor
• If the components can be easily separated, and adjusted out, treat this the same way as RM Scrap. However, and costs for labor and machines that went into the WIP will not be included, or accounted for.
• If the components cannot be easily identified and separated, and it is important to you to calculate the true cost of any labor and machine time that went into the WIP, then it should be treated as though it was completed as a finished product, but instead, received into a SCRAP site.
• Example - We issue Raw Materials to Produce 10 bread. We produce 6, and the other dough falls off the line. 
• We Receive 4 bread into our SCRAP site - Then adjust this out of stock, changing the distributions to hit the scrap account. Enter the MO number in the Batch to tie this back to the MO.
• A manual report can be done on all transactions to the SCRAP site
• We Issue more raw materials to produce an additional 4
• We receive our final 10 bread into our FG site
• Finished Goods Scrap (FG Scrap)
• This is finished goods that do not meet standards to be considered acceptable
• Example - Bread comes out misshapen, miscolored, or falls on the floor
• At this point, all costs have been put into the product, and it is a complete product that has to be dumped
• It should just be adjusted out of stock, with the distributions changed to point to a scrap account, and the MO in the Batch field.

Conclusion

• I want to measure scrap, but do not want it included in the cost of my finished goods
• The only way to do this is to reverse issue raw material from the MO, and then adjust it out, change the distributions and send the cost to a scrap account, enter the MO number in the Batch field, create a customized report.
• If backflushing, accept all default components, and adjust RM scrap out manually, or receive Scrapped FG directly into a scrap site, then adjust it out, change the distributions and send the cost to a scrap account, enter the MO number in the Batch field, create a customized report.
• Use standard costing - set the standard cost of the item, and measure cost variances against the standard cost