Hello. Just some tips.

What Dimitar describe is named Multilevel Manufacturing. You create a product that is delivered to stock (Semifinished product), and is a component in the next operation with its own manufacturing order.

The opposite is named Single level, where you have all operations in one BOM. 

From your description, it is a little difficult to advice exactly what is best.  But perhaps the cut material should be considered a semi finished ?

You also raise the question "select materials". But it is not clear what you need.  If it is to select a different component than what is specified in the BOM, it is tricky.  Mostly recommended to define two BOM's. The top one should be without components.  It will result in that the Manufacturing order is not set in status Confirmed. Then you can select BOM to use or manually add components. And then manually confirm.

You mention also scrap or waste. You hva two options: In the manufacturing order there is a smart button to register scrap.  Also exist in Work order.  Then you would have to know exatly the quantity to scrap, in addition to what has beed used in the manufcatured product.

The other option is just to set up flexible consumption, so you register the full qty used including the scrap.  

The main diffence for these two options is where the cost of waste is posted in accounting. Either as scrap cost or as cost of manufacture the finished product.

Hello, 

i personally used this strategy. If i have product A, which consists of product B(subassembly) plus some materials, i created product B as separate product(which can not be sold) and included it in the BOM of product A. You can add operations in the BOM of product B. I hope this is understandable! I do not know how to upload pictures, but i can send you similar application in our system.