Cut scrap, boost margins : A 2025 playbook for zero-waste manufacturing in Odoo 18

Why Scrap Management Matters in 2025

Manufacturing CEOs now rank “material efficiency” among their top three cost-reduction levers.
Global waste volumes rose 19% between 2018 and 2024, adding an estimated US $372 billion in direct disposal and lost-material costs to the industrial economy.
Scrap management is no longer a back-office exercise-it’s a board-level priority, now directly tied to sustainability metrics, compliance and margin protection.

Understanding Scrap in Manufacturing

Scrap refers to components or finished goods that are damaged, defective, expired or unfit for sale or further processing.
While often tracked as a percentage of throughput (e.g., PPM or parts-per-million scrap rate), scrap has hidden ripple effects: extra labor, unplanned downtime, quality penalties and erosion of customer trust.

The True Cost of Scrap: Latest Industry Data

• Steel Sector: Global demand for recycled steel scrap will reach 727 million tons by 2030 – a 5% CAGR driven by cost and carbon pressure.
• Lean Adoption: 70% of plants now run at least two Lean programs, achieving average lead-time cuts of 70–90% and scrap reductions of 35–45%.
• Sustainability Lens : Every metric ton of scrap steel reused avoids roughly 1.8 tons of CO₂ emissions, aligning with Scope 3 reduction targets.

How Odoo 18 Handles Scrap

Odoo 18 natively moves scrapped stock to a virtual location called “Virtual Locations/Scrap.”

This removes items from physical inventory, maintains auditability, and supports downstream cost accounting without distorting real-time stock counts.

Key Highlights in Odoo 18 Scrap Management

Feature	What Odoo 18 does	Benefit
Virtual Locations/Scrap	Auto-removes items from inventory on scrap action	Accurate, real-time inventory levels
Component/FInished Goods Handling	Supports scrapping at different MO stages	Enhanced quality control & traceability
Barcode / IoT Integration	Supports barcode/IOT-based scrap registration	Faster, more accurate scrap capture
Automatic Replenishment	Trigger pickings to replace scrapped components automatically	Keeps production flowing, less downtime
KPI Dashboards & Analytics	Built-in and extensible reporting for scrap rates, COPQ	Informed, data-driven process improvement
AI/ML Extensions (Customizable)	Predictive scrap analytics & root-cause detection	Prevents repeat defects, enables proactivity

Scrapping Components vs Finished Goods

• Components can be scrapped while an MO is still Draft or Confirmed – ideal for catching inbound quality issues before adding value.
• Finished Products are scrappable once the MO is Done, ensuring traceability after final QC.

Pro-tip : Enable barcode scanning so operators can flag scrap with a single scan, annotating defect codes for Pareto analysis.

Virtual Locations/Scrap : Transparent Accounting

Odoo treats Virtual Locations as internal but non-stockable spaces.
Finance teams can assign separate cost centers (e.g., Manufacturing Variance vs Quality Hold), enabling :

• Standard costing variance analysis
• Lean Six Sigma DMAIC tracking
• ESG (Environmental, Social, Governance) reporting

Warehouse managers can view aggregate scrap by navigating to Inventory → Configuration → Locations and filtering on “Scrap” locations.

Automating Replenishment for Scrapped Components

Tick “Replenish Scrapped Quantities” in the Scrap dialog to trigger an immediate internal picking that backfills the faulty component.
Odoo automatically respects routing rules – ideal for two and three-step manufacturing flows that separate picking from production.

Reporting & KPIs : Turning Scrap Data into Action

Pragmatic Techsoft extends Odoo dashboards with :

• Real-time Scrap-per-Unit gauges (red–amber–green) at work-center level
• 5-Why Drill-Down : Link each scrap line to defect codes, images and CAPA tasks
• Cost-of-Poor-Quality (COPQ) Widget : Combines labor, material, and disposal costs
• AI-Powered Analytics : Surfacing hidden root causes and forecasting high-risk runs

Monitor :

• Scrap Rate %
• COPQ
• Scrap per Work Center
• Top 5 defect codes by cost
• OEE and First-Pass Yield

Best Practices to Reduce Scrap (Lean, IoT, AI)

• AI-Driven Defect Detection & Prediction : Integrate AI with vision systems and IoT sensors. AI analyzes streams in real time, flagging subtle defects before assembly. Odoo can receive these alerts and trigger scrap automatically.
• AI-Powered Root Cause Analysis : Machine learning mines historical scrap, quality, and process data to uncover complex, multi-variable defect patterns—patterns too subtle for manual review. Pragmatic dashboards can highlight these for fast corrective action.
• Predictive Scrap Reduction: Extend Odoo with AI modules that forecast which batches, machines, or shifts are at greatest scrap risk – empowering preventive maintenance and proactive process tweaks.
• Standardized Work : Use Odoo Shop Floor instructions with images/videos to reduce operator errors.
• Kanban for Maintenance : Digital Kanban predicts tool wear, preventing dimensional drift and resulting scrap.
• Closed-Loop Feedback: Scrap codes feed FMEA reviews and supplier scorecards, driving true continuous improvement.

Early adopters of these Lean and digital practices have seen up to 10% OEE improvement.

Leaner, Greener Plants with Pragmatic Techsoft

Scrap will never be “zero,” but with Odoo 18 and Pragmatic Techsoft, you can turn a silent profit leak into a data-rich improvement engine.
From virtual scrap locations to AI-powered root-cause analytics, you gain :

• Real-time visibility on what’s really driving loss
• Faster scrap replenishment – less disruption, more uptime
• Leaner, greener operations – all on one scalable digital backbone

Ready to cut waste and boost margins?
Book a discovery call with our manufacturing experts today to see how Pragmatic Techsoft can tailor Odoo 18 to your plant’s zero-scrap vision.

Frequently Asked Questions

Q1. Can I reuse or recycle scrapped material in Odoo?
Yes. Create a secondary Rework virtual location and route materials back into a re-manufacturing MO once QC approves.

Q2. How do I stop operators from mis-posting scrap?
Use access rights to restrict the “Is a Scrap Location” checkbox and enable barcode scanners so users can only select pre-defined defect codes.

Q3. Does scrap tracking work with Odoo barcode & IoT boxes?
Absolutely. The barcode app calls the same Scrap wizard, and IoT-triggered defects can generate scrap orders via webhooks.

Q4. What KPIs should I monitor?
Start with Scrap Rate %, COPQ, Scrap per Work Center, and Top 5 defect codes by cost—then layer in OEE and First-Pass Yield.

Q5. How long does a Pragmatic implementation take?
Most mid-size plants go live in approximately 4–6 weeks; multi-site programs may extend to 12 weeks with phased rollouts.

Q6. How does AI help reduce scrap in Odoo 18 manufacturing?
AI enables earlier detection of root causes, predicts high-risk batches, and automates quality interventions by connecting process and IoT data to Odoo workflows.