Efficient inventory management is a cornerstone of any successful business, and handling unsellable or damaged products plays a critical role in maintaining accuracy. In Odoo, Scrap Locations provide a seamless way to manage inventory that is no longer usable or saleable. This feature ensures that businesses can track and account for such items without disrupting their main inventory workflows.
Scrap locations are virtual spaces where unusable inventory can be moved for future disposal, reworking, or recycling. Virtual locations in Odoo are not actual physical spaces within a warehouse. Instead, they are designated locations in the system's database used to track items that are not part of the physical inventory count. They help maintain clean and organized stock levels, ensuring that operational data remains accurate and reflects only usable goods. By utilizing scrap locations effectively, businesses can minimize errors, improve reporting accuracy, and optimize inventory processes.
In this blog, we will explore how scrap locations function in Odoo, their importance in warehouse operations, and how to configure and use them to enhance your inventory management system.
Creating a scrap location
First, you need to enable the storage location in the settings in the inventory module.
Then, navigate to configuration > Locations and create a new location, scrap location. You can also activate the "Is a Scrap Location" option. This will help Odoo recognize the purpose of the location.
Now, when you need to scrap a product, you can use this location in Odoo Inventory.
To illustrate this process, let's first purchase an out-of-stock item to closely track the product movement. For this, we can purchase 10 units of the product.
Scrap from stock
Consider a situation where we discover that some of the purchased items are damaged upon receipt. In this case, the primary focus shifts to identifying which products are designated for scrapping. To move some of these products that we have just purchased for scrapping, go to the Inventory app, click on Operations, then Scrap, and select New. This will open a new SP form.
If the scrap is associated with a specific operation, select the operation in the Source Document field. Additionally, if the product needs to be replenished, check the "Replenish Quantities" checkbox. In this case, we are creating a scrap order for two products. After clicking the validate button, a new smart button labeled "Product Moves" will appear.
Now you can check the correct movement of the product from here.
Update Inventory and Check Stock Levels
When a scrap operation is confirmed, Odoo automatically updates the inventory to account for the scrapped quantity. This real-time adjustment ensures accurate stock levels and helps prevent discrepancies in inventory records.
Now you can check the on hand quantity of this product.
The Inventory of the product Icecream, Sandwich shows eight units as On Hand Quantity, which means two units of the product are removed from inventory for scrapping.
Scrap Damaged Items Immediately Upon Reception
In a scenario where some of the purchased products are found to be damaged after delivery, you can easily manage them in Odoo. The screenshot below shows a purchase where you are receiving 3 units of the same product, but upon inspection, it is found that two of them are damaged.
You can validate the receipt of the products as illustrated below.
Now on clicking the gear button, you can find the option to create a scrap, as shown below.
Now, from here you can specify the product and the quantity to be scrapped.
Effects in Accounting
Ensure that the accounting entries for scrapped products are accurately recorded. In Odoo, stock movement journal entries are automatically generated when storable products are either received into stock from a virtual location or transferred out of stock to a virtual location. For example, transferring storable items to a virtual scrap location will create stock movement journal entries in the Accounting module, provided the appropriate settings are configured beforehand. In Odoo 18, you can activate the Automatic Accounting feature under the Stock Valuation tab in the Accounting module. This ensures that accounting entries are automatically created for all stock movements.You can specify the accounts to be used for automatic inventory valuation in the designated fields.
To trigger inventory valuation automatically, you must configure the product category correctly.
Here, the product category of our product is taken as ‘All’ and we have set the inventory valuation as automated. By doing so, an accounting entry will be automatically created to adjust inventory whenever a product is added to or removed from stock. After specifying the accounts for your stock movements, you can save the changes.
To track the value of products entering and leaving a scrap location, you can specify the accounting details in the location configuration window. This will trigger stock movement journal entries when transferring stock between an internal location and a scrap location.
After transferring 2 units of the "Ice Cream Sandwich" product to the scrap location, a new journal entry will be generated, as displayed in the image below.
You can click on the journal entry to view the details of the journal items. The Stock Valuation and Expense accounts will be displayed as affected under the Journal Items tab.
Conclusion
In conclusion, effective scrap management in Odoo streamlines the process of tracking and managing damaged or obsolete products, ensuring accurate inventory control and financial reporting. By leveraging features such as automatic accounting entries and stock movement journal generation, Odoo helps businesses maintain precise records when items are moved to scrap locations. Proper configuration of these features ensures seamless integration with your accounting system, minimizing errors and providing real-time visibility into stock status. With Odoo’s robust scrap management tools, businesses can improve operational efficiency and make more informed decisions regarding inventory and resource allocation.
To read more about How Scraping Affects the Inventory Value in Odoo 17, refer to our blog, How Scraping Affects the Inventory Value in Odoo 17.