How to Track and Reuse Manufacturing Scrap in Odoo to Improve Margins (2025 Guide)

In today’s competitive manufacturing environment, cost control and margin optimization are more critical than ever. As raw material costs rise and supply chains evolve, manufacturers are turning to new strategies to bolster profitability—one of which is smarter scrap management. With the 2025 updates to Odoo’s Manufacturing Resource Planning (MRP) module, manufacturers now have powerful tools to accurately track and reuse scrap material, turning what was once waste into a source of value.

In this guide, we’ll walk you through how to track, manage, and reintegrate scrap materials into your production process using Odoo. Business owners and operational leaders will discover how to set up scrap flows, track usable returns, and use Odoo’s MRP capabilities to enhance visibility and ultimately improve manufacturing margins.

What Is Manufacturing Scrap?

Manufacturing scrap refers to leftover, excess, or defective material that is not part of the final product. There are two main categories of scrap:

• Usable Scrap: Material that can be reprocessed or reused in production.
• Non-Usable Scrap: Waste that must be disposed of or sold as-is.

Recognizing and categorizing scrap correctly can lead to significant cost savings, more accurate inventory management, and improved environmental sustainability—all of which are now supported in Odoo’s 2025 system updates.

Why Scrap Management Matters for Profitability

Scrap is often viewed as a sunk cost. However, if tracked and reused effectively, it can become a hidden asset. According to recent industry trends in 2025, companies implementing closed-loop manufacturing—where scrap is continuously reused—have seen margin improvement of 3% to 7% annually.

Efficient scrap management in Odoo allows businesses to:

• Reduce raw material purchases
• Improve production forecasting
• Enhance real-time inventory accuracy
• Support regulatory compliance for waste tracking
• Meet sustainability goals (a growing brand differentiator in 2025)

Step-by-Step: Setting Up Scrap Tracking in Odoo

With the 2025 Odoo enhancements, tracking and reusing scrap is more streamlined than ever. Here’s how to get started:

Step 1: Activate Scrap Locations

• Go to Inventory > Configuration > Settings, and under the “Traceability” section, enable Storage Locations.
• Then, go to Inventory > Configuration > Locations, and create one or more storage locations specifically for scrap:
  • Scrap – Usable
  • Scrap – Non-Usable
  • Rework Area

These locations allow you to segment, measure, and assess your scrap—increasing transparency and traceability.

Step 2: Configure Scrap Rules

• Set up rules for scrap handling in Odoo’s Manufacturing module. For each product or bill of materials (BoM), define the typical scrap percentage.
• Navigate to Manufacturing > Products > Bill of Materials, select the product, then configure the scrap factor per component.

This ensures Odoo will automatically account for expected scrap during production orders—giving you more accurate cost tracking and planning.

Step 3: Record Scrap During Production

During the production process, operators can record scrap in real-time. Using a tablet-friendly interface or barcode scanners, shop floor teams can:

• Mark units or materials as scrap
• Record the reason (e.g., defect, overcut, excess)
• Assign scrap to the appropriate storage location

Odoo’s 2025 UI improvements make this faster and easier through the Work Orders interface.

How to Reuse Usable Scrap in Odoo

Once scrap is tracked, reusing it becomes the next lever for saving costs.

Step 1: Manual vs. Automatic Integration

Odoo allows two approaches based on your production workflow:

• Manual Reuse: A warehouse manager monitors the scrap location and proactively moves usable materials back into stock via internal transfers.
• Automatic Reuse: Advanced rules (available in Odoo Enterprise) automate the movement of scrap materials based on triggers, such as reprocessing or secondary production runs.

Step 2: Create Rework Orders

Usable scrap can be reprocessed through a Rework Order, which is a type of manufacturing order focused on bringing defective or excess products back to usable condition.

• In Manufacturing > Operations > Manufacturing Orders, click “Create”, then select ‘Rework’ as the purpose.
• Add the scrap product as input and define the finished product.

This allows full traceability and cost logging.

Step 3: Update Stock and Costing

When reusing scrap, it’s vital to ensure your accounting reflects the value recovery.

• Enable Landed Costs in Odoo Accounting
• Configure standard or average cost methods to adjust material costs based on scrap reuse

Odoo will handle the updates automatically once defined, improving real-time margin visibility.

Reporting and Optimization: Using Odoo Analytics for Scrap Insights

With the 2025 release, Odoo introduces more powerful reporting tools leveraging its integration with Odoo Spreadsheet and Studio Apps. Use these to uncover inefficiencies and optimize production:

• Scrap Reports: See scrap rate per product, work center, or employee.
• Cost Impact Dashboards: Analyze how scrap affects overall material spending and manufacturing costs.
• Root Cause Analysis: Build custom reports tracking reasons for scrap—valuable for continuous improvement initiatives.

By building these insights into your weekly or monthly operational reviews, your team can identify recurring scrap patterns and implement corrective actions.

2025 Trends: Scrap Reduction as a Strategic Sustainability Goal

Sustainability is no longer just a buzzword—it’s a metric investors, customers, and regulators are tracking closely. In 2025, more governments have implemented environmental compliance for industrial waste, including digital reporting mandates.

Odoo supports digital traceability for waste flows, allowing manufacturers to stay compliant while also leveraging scrap data in ESG (Environmental, Social & Governance) reporting.

Additionally, more manufacturers are listing their sustainability metrics in sales proposals. Showing reduced scrap and closed-loop reuse not only improves your bottom line—it can help you win more deals.

Final Thoughts: Scrap Isn’t Waste—It’s Opportunity

By effectively tracking and reusing manufacturing scrap in Odoo, companies can drive substantial improvements in margins and sustainability. With modern tools available in the Odoo 2025 platform, turning waste into value is no longer a logistical headache or cost burden.

If you haven’t yet optimized your scrap management strategy—or if your current ERP doesn’t support seamless scrap integration—it’s time to explore how Odoo can transform your operations.

Want to learn more about customizing Odoo for your specific manufacturing workflows?
Let’s connect—schedule a free consultation with our Odoo experts today, and discover how smarter scrap handling can improve your margins.