Category: Business CentralRead time: 6 MinsPublished on: 04 Mar 2026

Scrap Management in Dynamics 365 Business Central Manufacturing: Item Card, BOM & Routing

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Scrap Management in Microsoft Dynamics 365 Business Central manufacturing plays a critical role in accurate material planning, cost rollup, and capacity calculation. Scrap configuration directly impacts Material Requirements Planning (MRP), production costing, inventory valuation, and Work in Process (WIP) reporting.

If your organization requires expert assistance in configuring scrap, routing, or production costing, explore our Business Central consulting services to ensure accurate manufacturing setup and financial control.

Microsoft Dynamics 365 Business Central provides three structured methods to manage scrap in production:

  • Scrap percentage on the Item Card for production items.
  • Scrap percentage in the BOM for components
  • Scrap percentage and fixed quantity in the routing for production output and operations

1. What is Scrap Management in Microsoft Dynamics 365 Business Central?

Scrap management in Microsoft Dynamics 365 Business Central refers to the process of accounting for expected material loss, yield reduction, or production waste during manufacturing. By defining scrap percentages at the Item Card, Production BOM, or Routing level, the system automatically adjusts material requirements, capacity planning, and cost calculations to reflect realistic shop floor performance.

  1. Item Card

    The scrap percentage specified on the item card is used by Business Central to adjust the required components and capacity for the finished product. Scrap defined at the Item Card level is typically used when yield loss affects the entire production process. This method increases both material consumption and capacity requirements and directly impacts standard costing and rolled-up cost calculations.

    For example, if a 10% scrap percentage is set on the item card for a production run of 100 pieces, BC will calculate the need for 110 components and determine the necessary capacity to produce 110 pieces.

    A screenshot of an Item Card for item FG0120. A red box highlights the 'Scrap %' field under the production settings, which is currently set to 2.

    In the setup above, the material requirement for FG0120 will increase by 2 percent for all components in the production BOM.

    A screenshot of the BOM Structure page for parent item FG0120. A red box highlights the 'Qty. per Parent' column, showing the specific quantities required for various components.

    This will also impact the cost rollup, including capacity costs. Because scrap is included in the cost rollup, it affects inventory valuation and profitability analysis. Higher scrap percentages increase material cost, capacity cost, and overall finished goods cost in Microsoft Dynamics 365 Business Central. See the 'Rolled-up Scrap Cost' and 'Rolled-up Capacity Cost' below.

    A screenshot of the BOM Cost Shares page for item FG0120, displaying a breakdown of costs. A blue highlight at the bottom right shows a Total Cost (Rolled-up Capacity) of 16.32 for the Work Center.

    If we create a production order for 10 units, the material and capacity demand will account for the scrap percentage mentioned above.

    A screenshot of production order 111309 for item FG0120. Red boxes highlight the total Quantity of 10 and the carried-over Scrap % of 2 on the production line.
    A screenshot of the Prod. Order Routing page for the same order in Business Central. Red boxes highlight a Run Time of 4 and an Expected Capacity Need of 40.8.
    The Prod. Order Components list for order 111309. Red boxes highlight the Quantity per (base requirement) versus the Expected Quantity.

    These are the expected quantities in the Production Journal, and they will be auto-populated. Any consumption exceeding the expected quantity will result in an additional ledger entry. Any difference between expected and actual consumption will result in production variance entries, which can be analyzed for scrap variance and manufacturing efficiency tracking.

    A screenshot showing the posted Consumption Quantity entries. A red box highlights total units (and other scrap-adjusted totals) have been recorded for the components.
  2. Production BOM

    We can also specify a scrap percentage for individual components in the production Bill of Materials (BOM). Defining this percentage will increase the quantity required for that specific component, without affecting the other components or the capacity requirements for operations.

    The Production BOM for FG0120. A red box highlights the Scrap % column on the lines, showing a specific scrap factor of 25% assigned to component E0124.

    This will not impact any other components in the BOM or capacity requirements. Production BOM scrap is ideal when specific raw materials experience higher wastage rates. This method allows manufacturers to control component-level yield loss without affecting routing operations or overall capacity planning.

    A screenshot of the BOM Structure showing the impact of the 25% component-specific scrap. A red box highlights that the Qty. per Parent for component E0124 is now 1.25.
    A screenshot of the BOM Cost Shares page for FG0120. A red box highlights the Rolled-up Scrap Cost column, showing a value of 54.75 attributed to the scrap factors.

    The components list will display the scrap percentages defined in the production BOM. This will be carried forward to the Production Journal.

    A screenshot of the BOM Cost Shares page for item FG0120. A red box highlights the Rolled-up Scrap Cost column, showing a scrap value of 25% from the specified scrap factors.
    A screenshot of the Production Journal for order 111309. A red box confirms a Consumption Quantity of 12.5 for the specific component E0124.
  3. Routing

    Scrap can be assigned to a specific operation using the 'Scrap Factor %' field in the routing. By setting a scrap factor for an operation, you define whether it generates scrap. This will increase the required quantities for all components involved in the operation, as well as those used in any preceding operations. Additionally, it will raise the capacity requirements for both the operation and its prior operations. To ensure accurate quantity calculations, it's essential to link the components to the operations using routing link codes. Routing scrap factors directly influence capacity load calculation and shop floor efficiency. When scrap is defined at the routing level, Microsoft Dynamics 365 Business Central increases material demand for all linked components and recalculates capacity requirements for the affected operations.

    A screenshot of the Routing setup for R00170. A red box highlights the Scrap Factor % field on the routing line, which is set to 50.

    In the production order, this will increase the demand for all components and capacity by 50 percent.

    A screenshot of the Prod. Order Components list reflecting the 50% routing scrap factor, resulting in an Expected Quantity of 15 for several components on a 10-piece order.
    A screenshot of the Prod. Order Components and Routing pages for order 111309. Red boxes highlight that the 50% routing scrap has inflated the Expected Quantity of components to 15 and the Expected Capacity Need to 60 for a 10-unit order.

    This will also increase the output by 50 percent in the Production Journal, with the additional output classified as scrap.

    A screenshot of production journal in Business Central showing the output quantity as 15.

    By default, the system generates the output quantity, including scrap. In the example above, the production quantity is 10, and scrap is 5. After production, the user must manually update both the original output and scrap quantities.

    Additionally, the routing configuration allows us to enter a “Fixed Scrap Quantity.” Fixed Scrap Quantity is useful when a consistent quantity of loss occurs in every production run, regardless of order size. This value is added on top of percentage-based scrap and further impacts MRP planning and production cost estimation. This fixed scrap value will be incorporated into the total production demand, on top of the demand that has already been increased by the existing 50% scrap factor.

    A screenshot showing a final routing setup with the addition of a Fixed Scrap Quantity of 1 along with the 50% Scrap Factor.
    A screenshot of the component list showing the result of the combined scrap setup. The Expected Quantity is now 16 (10 units + 50% factor + 1 fixed unit).
    The component list reflecting the combined factors. For a 10-unit order, the Expected Quantity is now 16 (10 units + 50% factor + 1 fixed unit). The Expected Capacity Need is similarly adjusted to 64.

    When recording this production entry in the journal, ensure that the scrap quantity is recorded separately and clearly distinguished from the actual finished goods output.

    A screenshot of the final Production Journal entry shows an Output Quantity of 10 and a Scrap Quantity of 6 (reflecting the 50% factor and the 1 fixed unit).
    A screenshot of the Production Journal and Capacity Ledger showing a final Output Quantity of 10 with a Scrap Quantity of 6 recorded.

Difference Between Item Card Scrap, BOM Scrap, and Routing Scrap

  • Item Card Scrap – Increases material and capacity demand for the entire finished product.
  • Production BOM Scrap – Increases quantity for a specific component only.
  • Routing Scrap – Increases material demand and capacity load for specific operations and preceding operations.

Understanding these differences helps manufacturers choose the correct scrap method based on where production loss occurs.

2. Impact of Scrap on MRP and Production Planning

In Material Requirements Planning (MRP), scrap percentages are automatically factored into supply planning calculations. Microsoft Dynamics 365 Business Central increases purchase and production suggestions to compensate for expected yield loss, preventing material shortages during manufacturing.

Proper scrap configuration ensures realistic planning parameters and reduces last-minute procurement or production disruptions.

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