Scrap Is Not Waste Until You Stop Tracking Its Value
Scrap is part of almost every steel manufacturing process.
A coil is slit and edge scrap is generated.
A plate is cut and offcuts remain.
A billet is processed and production loss occurs.
Bars are cut to customer dimensions.
Pipe and tube production generates end cuts and rejects.
Casting operations generate returns and rejected material.
Some scrap can be reused in production.
Some needs further processing.
Some is transferred to a scrap yard.
Some is sold.
The problem starts when all of this material is simply recorded as "scrap."
Management may know how much raw material went into production and how much finished material came out, but still struggle to answer:
How much scrap was generated?
Which production order generated it?
What type and grade of scrap is it?
Where is it physically stored?
How much has been reused?
How much has been sold?
What is its value?
Is the actual scrap within the expected percentage?
Does the scrap inventory in ERP match the physical scrap yard?
For a steel manufacturer processing thousands of tonnes, even a small gap in scrap control can have a direct impact on inventory accuracy, production costing and profitability.
Steel Scrap Management Software helps maintain the complete movement of scrap from generation to recovery, reuse or final sale.
What Is Steel Scrap Management Software?
Steel Scrap Management Software is used to record, classify, track, value and reconcile scrap generated during steel manufacturing and processing.
Depending on the steel operation, it can manage:
The objective is not only to know that scrap was generated.
The system should tell management where it came from, how much was generated, where it went and what happened to it.
- Production scrap
- Process scrap
- Edge trim
- Cutting scrap
- Offcuts
- End cuts
- Rejected material
- Reusable scrap
- Melting scrap
- Customer scrap where applicable
- Job work scrap
- Scrap inventory
- Scrap transfer
- Scrap reuse
- Scrap sale
- Scrap weight
- Scrap value
Why Scrap Management Is Different in the Steel Industry
Scrap in many industries may have limited value.
Steel is different.
Scrap itself can be a valuable raw material.
It may be reused internally, returned to the melting process or sold in the market.
Its value may depend on:
This makes scrap both a production issue and an inventory asset.
- Grade
- Material type
- Chemical composition
- Quality
- Size
- Weight
- Market price
- Source
Scrap Starts With the Production Transaction
Good scrap control should begin where scrap is generated.
Consider a production order consuming 10 MT of raw material.
The output may be:
The system should not simply reduce 10 MT of raw material and create 9.40 MT of finished goods.
It should also account for what happened to the remaining 0.60 MT.
- 9.40 MT finished product
- 0.45 MT recoverable scrap
- 0.15 MT process loss
Scrap and Process Loss Are Not the Same
This distinction is important.
Scrap is material that physically exists and may still have recoverable value.
Process loss may represent material that cannot practically be recovered according to the production process.
If both are treated as the same thing, management loses visibility into actual recoverable inventory.
The ERP should therefore allow the business to classify production differences appropriately.
Scrap Generation by Production Order
Every scrap quantity should ideally have a source.
The source may be:
The exact reference depends on the manufacturing process.
This makes it possible to analyse where scrap is being generated.
- Production order
- Job
- Machine
- Operation
- Work centre
- Heat
- Coil
- Plate
- Billet
- Batch
Scrap Generation by Operation
A multi-stage steel process can generate scrap at different stages.
For example:
Recording scrap by operation helps management identify where material loss is occurring.
- Melting
- Casting
- Rolling
- Slitting
- Cut-to-length
- Blanking
- Cutting
- Machining
- Finishing
- Packing
Slitting Scrap Management
Slitting operations are a good example of why steel-specific scrap management is required.
A mother coil may weigh 20 MT.
It is slit into several child coils.
The output could include:
The total should reconcile with the original mother coil weight within the defined tolerance.
- Child Coil 1
- Child Coil 2
- Child Coil 3
- Edge trim
- Other scrap
- Process loss
Parent and Child Coil Reconciliation
For coil processing businesses, the system should maintain the relationship between:
This provides complete material genealogy.
Management can answer:
Which mother coil produced this child coil?
How much usable output came from the mother coil?
How much scrap was generated?
What was the actual yield?
- Mother coil
- Child coils
- Finished output
- Scrap
- Process loss
Cut-to-Length Scrap Management
Cut-to-length operations can also generate offcuts.
Suppose a plate or coil is processed against customer-specific dimensions.
The system can record:
Not every remaining piece should automatically be treated as scrap.
- Input material
- Required dimensions
- Finished output
- Offcut
- Reusable balance
- Scrap
- Process loss
Reusable Offcut Versus Scrap
A remaining plate or coil piece may still be usable for another order.
If it has sufficient dimensions and quality, it may be returned to inventory as a reusable offcut.
The system should distinguish between:
This can prevent valuable usable material from being unnecessarily written down as scrap.
- Reusable material
- Scrap
- Process loss
Scrap in Rolling Mill Operations
Rolling operations may generate:
The scrap should be linked with the relevant production process so management can analyse recovery and yield.
- Crop ends
- Rejected bars
- Cobble scrap
- Defective output
- Other process scrap
Billet and Bar Scrap
For billet and bar manufacturers, material may be lost through:
The system can maintain these quantities separately rather than hiding them inside production variance.
- End cutting
- Size correction
- Defect removal
- Rejected output
- Production trials
Pipe and Tube Scrap Management
Pipe and tube production may generate:
The system can record scrap against the relevant production order, input coil or heat depending on the traceability requirement.
- End cuts
- Trim scrap
- Rejected tubes
- Coil remnants
- Setup scrap
- Defective material
Casting Scrap Management
Casting operations can generate different types of recoverable material.
Some material may return directly to melting.
Other material may require segregation or further processing.
The ERP can classify these materials so reusable returns are not mixed with saleable scrap.
Scrap Classification
All scrap does not have the same value.
The business may classify scrap by:
This helps both inventory and commercial teams manage scrap correctly.
- Material type
- Grade
- Alloy
- Source
- Quality
- Size
- Form
- Reusable or non-reusable status
- Internal or external source
Grade Wise Scrap Management
Grade becomes particularly important when scrap is reused in production.
Mixing different grades may affect the production process and chemical composition.
The system can therefore maintain grade information where required.
This gives production better visibility into what scrap is actually available for reuse.
Heat Wise Scrap Traceability
Some steel operations may need to maintain heat information for recoverable material.
The scrap transaction can retain a reference to:
This provides stronger traceability when scrap is returned to production.
- Heat
- Production batch
- Material
- Production order
Scrap Weight Should Be Captured Properly
Scrap is normally controlled primarily by weight.
Common units include:
The system may also maintain additional quantities depending on the scrap type.
Accurate scrap weight is essential because it affects:
Accurate scrap weight is essential because it affects: production yield, inventory, cost, scrap sale or material reconciliation.
- MT
- KG
Estimated Scrap Versus Actual Scrap
Production planning may define an expected scrap percentage.
For example, a slitting operation may have a planned scrap of 2 percent.
Actual production may generate 2.8 percent.
The system should make this difference visible.
Management can then investigate why actual scrap exceeded the standard.
Scrap Percentage
A simple scrap percentage can be analysed using the relevant production input and actual scrap generated.
The exact calculation should follow the company's production methodology.
The important point is consistency.
If every plant calculates scrap differently, management cannot make a meaningful comparison.
Scrap Variance Analysis
Management should be able to compare:
This can be analysed by:
This can be analysed by: product, machine, production order, shift, plant, operation, material grade or period.
A high scrap percentage is more useful when management knows where it came from.
- Standard scrap
- Expected scrap
- Actual scrap
- Variance
Yield and Scrap Need to Be Reviewed Together
Scrap should never be analysed separately from production yield.
A production process may report low scrap but still have poor yield because material is disappearing into unexplained process variance.
Management should reconcile:
This creates a much stronger production control.
- Input material
- Finished output
- Reusable output
- Scrap
- Process loss
Production Yield Analysis
Consider a process consuming 100 MT.
Output is:
The material is fully accounted for.
Management can now review whether each component is within the expected range.
- 94 MT finished goods
- 3 MT reusable material
- 2 MT scrap
- 1 MT process loss
Unexplained Material Difference Should Be Visible
If the system shows:
There is still 3 MT unaccounted for.
That difference should not disappear into a monthly inventory adjustment.
The system should highlight it for investigation.
- 100 MT input
- 94 MT finished output
- 2 MT scrap
- 1 MT process loss
Scrap Inventory Management
Once scrap is generated and accepted, it becomes inventory.
The system should know:
This gives management a proper scrap stock position.
- Scrap item
- Scrap category
- Grade
- Weight
- Location
- Source
- Date
- Value
- Status
Scrap Yard Location
Scrap may be transferred from production to a dedicated scrap yard or warehouse location.
The system can record:
This creates a controlled movement rather than simply assuming scrap is somewhere in the plant.
- Source production location
- Scrap item
- Quantity
- Weight
- Destination scrap location
- Transfer date
Physical Scrap Versus System Scrap
One of the most important controls is reconciling physical scrap with ERP inventory.
Management should periodically compare:
This is particularly important because scrap has real commercial value.
- System quantity
- Physical quantity
- Variance
- Reason
Scrap Stocktake
A scrap stocktake can be performed periodically.
The process may include:
A proper audit trail should remain for approved adjustments.
- Scrap category
- Location
- System weight
- Physical weight
- Difference
- Approval
- Adjustment
Scrap Reuse in Production
Steel scrap may return to production.
For example, internal scrap can be used as an input in a melting process.
The system should record:
This reduces scrap inventory and adds the material to the relevant production process.
- Scrap item
- Quantity consumed
- Source location
- Production order
- Heat
- Date
Internal Scrap Recovery
Internal recovery is valuable because material that might otherwise be sold can be reused as a production input.
Management can analyse:
This gives a much clearer view of material recovery.
- Scrap generated
- Scrap reused
- Scrap sold
- Scrap balance
Scrap Consumption in Melting
For melting operations, scrap may form part of the charge mix.
The production team may use:
The ERP can record the quantity of each material used against the relevant heat or production batch.
- Internal scrap
- Purchased scrap
- Other metallic inputs
Purchased Scrap Versus Internal Scrap
Purchased scrap and internally generated scrap should remain distinguishable.
Management may want to compare:
This helps procurement and production decide how available material is being used.
- Purchase price
- Internal scrap value
- Consumption
- Availability
- Grade
- Supplier
Scrap Transfer Between Plants
A multi-plant steel company may move scrap from one location to another.
For example, a processing plant generates scrap but another plant has melting facilities.
The system can maintain:
This creates visibility across the group.
- Sending plant
- Receiving plant
- Scrap type
- Weight
- Dispatch
- In-transit quantity
- Receipt
- Weight variance
Weighbridge Integration for Scrap
Scrap inward and outward movements often pass through a weighbridge.
For a scrap sale, the system may record:
The approved weighbridge weight can become the basis for inventory and commercial transactions according to the company's process.
- Vehicle
- Tare weight
- Gross weight
- Net weight
- Scrap category
- Customer
- Dispatch reference
Scrap Purchase Through Weighbridge
Purchased scrap can follow a similar process.
The system can connect:
This provides better control over purchased scrap.
- Supplier
- Purchase order
- Vehicle
- Gross weight
- Tare weight
- Net weight
- Scrap category
- Inspection
- Accepted quantity
- Inventory receipt
Scrap Quality Inspection
Weight alone may not determine the final accepted quantity.
Scrap may need to be inspected for:
The final accepted quantity can then be recorded according to the company's process.
- Grade
- Contamination
- Moisture
- Foreign material
- Size
- Other quality parameters
Scrap Rejection and Deduction
Suppose the weighbridge shows 25 MT of incoming scrap.
Inspection identifies material that should not be accepted.
The system may maintain:
This creates transparency for supplier settlement.
- Gross material quantity
- Deduction
- Rejected quantity
- Accepted quantity
- Reason
Scrap From Job Work
Subcontracting creates another scrap control requirement.
Material is sent to an outside processor.
The subcontractor returns finished material.
Scrap may also be returned.
The system should reconcile:
This helps prevent material from remaining unaccounted for at the subcontractor.
- Material sent
- Finished material received
- Scrap returned
- Process loss
- Balance pending
Scrap Ownership in Job Work
The commercial agreement should define who owns the generated scrap.
Depending on the contract, scrap may:
The ERP process should follow the agreed commercial arrangement.
- Belong to the principal company
- Remain with the subcontractor
- Be adjusted against processing charges
- Be returned physically
Job Work Scrap Reconciliation
Suppose 10 MT is sent for external processing.
The subcontractor returns:
The system should clearly show this reconciliation rather than closing the job work transaction only when finished goods are received.
- 9.2 MT finished material
- 0.5 MT scrap
- 0.2 MT process loss
- 0.1 MT pending material
Scrap Sales Management
Scrap sales should be controlled like any other valuable material sale.
The process may include:
This gives the company a proper commercial trail.
- Scrap availability
- Customer or scrap buyer
- Quotation
- Price
- Approval
- Sales order
- Vehicle
- Weighbridge
- Dispatch
- Invoice
- Inventory reduction
Scrap Pricing
Scrap prices can change frequently.
Pricing may depend on:
The system can maintain approved prices and validity periods according to the company's sales policy.
- Scrap category
- Grade
- Market price
- Customer
- Quantity
- Location
- Contract
Scrap Price Approval
Because scrap can have significant value, companies may want an approval process for prices below a defined level.
The system can route the transaction for approval before dispatch.
This reduces the risk of uncontrolled pricing.
Scrap Buyer Management
The ERP can maintain scrap buyers as customers with information such as:
This connects scrap disposal with normal financial control.
- Commercial terms
- Payment terms
- Credit limit
- Tax information
- Previous transactions
- Outstanding balance
Scrap Dispatch
Once the sale is approved, dispatch should reference the sales transaction.
The process can maintain:
This prevents scrap from leaving the plant without an authorised business document.
- Scrap item
- Quantity
- Location
- Vehicle
- Weight
- Customer
- Dispatch date
- Weighbridge slip
Gate Control for Scrap
Scrap is a sensitive material at the plant gate.
Security should be able to verify:
This provides an additional control before the vehicle exits.
- Approved sales document
- Scrap type
- Vehicle
- Weight
- Customer
- Gate pass
- Dispatch status
Scrap Invoice and Accounts
After dispatch, the commercial transaction should flow into invoicing and accounting.
This connects:
Finance no longer needs a separate scrap sales spreadsheet.
- Scrap inventory reduction
- Sales revenue
- Customer receivable
- Applicable taxation
- Financial reporting
Scrap Valuation
Scrap valuation depends on the company's costing and accounting policy.
The system should support the agreed method rather than applying one generic valuation method to every steel company.
The important requirement is that scrap inventory and scrap recovery have a defined financial treatment.
Scrap Recovery and Production Cost
Recoverable scrap can affect the economics of production.
If the business can recover value from scrap, management may need to consider this while analysing production cost.
The costing design should therefore define how scrap recovery is treated.
Why Scrap Value Matters for Product Costing
Consider two production orders using the same quantity of raw material.
Both generate the same finished output.
But one generates higher-value recoverable scrap.
Their net economic result may not be identical.
A proper costing system should provide the information management needs to analyse this difference.
Scrap and Profitability
Poor scrap control affects profitability in several ways.
More scrap may mean lower production yield.
Unrecorded scrap creates inventory loss.
Incorrect classification may reduce recovery value.
Poor sales control may reduce scrap revenue.
Incorrect weight affects billing.
All of these ultimately affect margin.
Scrap by Machine
If the production system captures the relevant source, management can compare scrap generated by different machines.
For example:
A machine consistently producing higher scrap may require technical investigation.
- Slitting Line 1
- Slitting Line 2
- Rolling Mill 1
- Rolling Mill 2
- Cutting Machine 1
Scrap by Shift
The same analysis can be performed by shift where shift information is maintained.
Management may identify whether higher scrap is associated with:
This gives operations teams more useful information than a company-wide scrap percentage.
- A particular shift
- Operator group
- Machine setup
- Production period
Scrap by Product
Some products naturally generate more scrap because of dimensions or production requirements.
Management can compare scrap by:
This helps distinguish expected material loss from abnormal loss.
- Product
- Grade
- Size
- Customer order
- Production route
Scrap by Customer Order
Customer-specific dimensions can influence scrap generation.
A special cut or width may create more offcut than a standard product.
Linking production scrap with the sales or production requirement helps management understand the real cost of fulfilling the order.
Scrap by Plant
For multi-plant companies, management can compare:
Across locations.
This can highlight plants with stronger material utilisation.
- Scrap percentage
- Yield
- Scrap value
- Scrap recovery
- Scrap sales
Daily Scrap Reporting
Management should not have to wait until month-end to know that scrap has increased.
A daily report can show:
This gives operations much earlier visibility.
- Scrap generated today
- Scrap by production area
- Scrap percentage
- Scrap transferred to yard
- Scrap reused
- Scrap sold
- Current scrap stock
Scrap Dashboard
A useful steel scrap dashboard may include:
This gives management a clear picture of material recovery.
- Total scrap generated
- Scrap percentage
- Scrap by plant
- Scrap by machine
- Scrap by operation
- Scrap by grade
- Reusable scrap
- Scrap stock
- Scrap reused
- Scrap sold
- Scrap sales value
- Actual versus standard scrap
Exception Based Scrap Management
Management does not need to review every normal scrap transaction.
The system should highlight exceptions such as:
These are the transactions that need attention.
- Scrap above standard
- Yield below target
- Unexplained material variance
- Scrap not transferred to scrap location
- Physical and system stock mismatch
- Job work scrap pending
- Scrap sale below approved price
- Weight variance above tolerance
Scrap Reconciliation Should Be Part of Production Closing
A production order should not be considered complete simply because finished goods were produced.
Before closing, the system should reconcile:
This creates stronger production discipline.
- Input
- Finished output
- By-product where applicable
- Reusable material
- Scrap
- Process loss
- Variance
Monthly Scrap Reconciliation
At month-end, management can review:
The physical scrap stock should then be compared with the system balance.
- Opening scrap inventory
- Plus scrap generated
- Plus scrap purchased
- Plus transfers in
- Minus scrap reused
- Minus scrap sold
- Minus transfers out
- Plus or minus approved adjustments
- Equals closing scrap inventory
Audit Trail for Scrap Adjustments
Any manual scrap adjustment should have:
This is particularly important because scrap has both inventory and resale value.
- User
- Date
- Quantity
- Reason
- Approval
Reports for Steel Scrap Management
Useful reports may include:
- Scrap Generation Report
- Production Scrap Report
- Scrap by Production Order
- Scrap by Machine
- Scrap by Operation
- Scrap by Shift
- Scrap by Grade
- Scrap by Heat
- Scrap Inventory Report
- Scrap Location Report
- Scrap Reuse Report
- Scrap Purchase Report
- Scrap Sales Report
- Scrap Price Report
- Scrap Weight Variance Report
- Job Work Scrap Reconciliation
- Scrap Yield Report
- Standard Versus Actual Scrap Report
- Scrap Stock Reconciliation
- Scrap Profitability Report
A Practical Slitting Example
A steel service centre receives a mother coil weighing 20 MT.
The coil is allocated to a slitting production order.
After processing, the output is:
NAVSteel can maintain the parent-child relationship and material reconciliation.
The three child coils enter finished inventory.
The 0.45 MT scrap moves to the relevant scrap location.
The 0.15 MT process loss is recorded according to the defined process.
Management can see the actual yield of the mother coil.
- Child Coil A: 7.40 MT
- Child Coil B: 6.20 MT
- Child Coil C: 5.80 MT
- Edge Scrap: 0.45 MT
- Process Loss: 0.15 MT
- Total: 20 MT
A Practical Rolling Mill Example
A rolling mill consumes 100 MT of billets.
The production output is 96 MT.
Recoverable scrap is 2.5 MT.
Process loss is 1.5 MT.
The system reconciles the full 100 MT.
If standard scrap was expected to be 1.8 MT, management can immediately see that actual scrap is higher than planned.
The production team can investigate the reason instead of discovering the difference during month-end stock reconciliation.
A Practical Job Work Example
A steel company sends 25 MT of material to an outside processor.
The subcontractor returns:
NAVSteel can maintain the input-output reconciliation.
Management can see that the job is not yet fully settled because 0.2 MT remains outstanding.
- 23.8 MT finished material
- 0.7 MT scrap
- 0.3 MT process loss
- 0.2 MT material still pending
A Practical Scrap Sale Example
The scrap yard has 50 MT of a particular scrap category.
Management approves the sale of 20 MT.
A sales transaction is created for the approved scrap buyer.
The vehicle enters the plant.
Tare weight is captured.
Scrap is loaded.
The weighbridge confirms an actual net weight of 19.82 MT.
The approved quantity is dispatched.
Scrap inventory reduces.
The sales invoice follows the company's commercial terms.
Finance records the revenue.
Management can trace the complete transaction from scrap generation to final sale.
What to Look for in Steel Scrap Management Software
Before selecting a Steel Scrap Management Software, check whether it supports the complete scrap lifecycle rather than only maintaining a scrap item in inventory.
Important capabilities may include:
- Production scrap recording
- Production order linkage
- Operation-wise scrap
- Machine-wise scrap
- Heat tracking
- Grade-wise scrap
- Weight-based inventory
- Reusable offcuts
- Process loss
- Yield calculation
- Standard versus actual scrap
- Scrap location management
- Scrap transfer
- Scrap reuse
- Purchased scrap
- Job work scrap
- Scrap reconciliation
- Scrap sales
- Pricing
- Weighbridge integration
- Gate control
- Inventory
- Costing
- Finance
- Audit trail
- ERP integration
Every Tonne Should Be Accounted For
Steel manufacturers spend a great deal of time controlling raw material prices, production schedules and customer orders.
Scrap deserves the same attention.
If 100 MT enters production, management should know how that material was converted.
How much became finished product?
How much remained reusable?
How much became scrap?
How much was lost during the process?
Where is the scrap now?
How much was reused?
How much was sold?
And what value was recovered?
When these answers come from separate production sheets, scrap registers, weighbridge records and Excel files, management never has a completely reliable material picture.
NAVSteel connects scrap with production, inventory, weight, job work, sales and finance on Microsoft Dynamics 365 Business Central.
The result is not simply better scrap reporting. It is better control over yield, inventory, production cost and profitability.
If your steel business still reconciles production scrap manually or cannot easily account for every tonne of material from input to final output, talk to Prudence about NAVSteel and see how scrap and yield can be managed as part of your complete steel ERP process.
Frequently Asked Questions
What is Steel Scrap Management Software?
Steel Scrap Management Software tracks scrap generated during manufacturing, its classification, weight, inventory, reuse, transfer and sale.
Can steel scrap be linked with a production order?
Yes. Scrap can be associated with the relevant production order, operation, material, machine, heat or other production reference depending on the implemented process.
Can NAVSteel differentiate scrap and process loss?
Yes. The production process can be designed to maintain recoverable scrap separately from process loss according to the company's manufacturing and costing requirements.
Can reusable offcuts be maintained separately from scrap?
Yes. Material that is still usable can be returned to an appropriate inventory category rather than automatically treating it as scrap.
Can NAVSteel track scrap by weight?
Yes. Weight-based inventory is an important steel-specific requirement and scrap can be managed in MT, KG and other relevant units according to the process.
Can internal scrap be reused in production?
Yes. Reusable scrap can be issued back into the relevant production process, such as melting, according to the company's manufacturing process.
Can scrap generated by a subcontractor be reconciled?
Yes. Job work transactions can reconcile material sent, finished material received, scrap returned, process loss and pending material.
Can scrap sales be managed in NAVSteel?
Yes. Scrap sales can be connected with pricing, customer, inventory, weighbridge, dispatch, invoicing and financial processes.
Can the weighbridge be used for scrap transactions?
Yes. Depending on the technical environment, weighbridge information can be connected with scrap inward and outward transactions.
Does NAVSteel work with Microsoft Dynamics 365 Business Central?
Yes. NAVSteel extends Microsoft Dynamics 365 Business Central with steel-specific processes such as weight-based inventory, heat tracking, production, scrap, yield, job work, quality, MTC, weighbridge and material movement.
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