Scrap containing plug holes may be produced with this (7)
I believe the answer is:
bradawl
'holes may be produced with this' is the definition.
'scrap containing plug' is the wordplay.
'scrap' becomes 'brawl'.
'containing' indicates putting letters inside.
'plug' becomes 'ad' (Advertisement plugs products).
'brawl' going around 'ad' is 'BRADAWL'.
(Other definitions for bradawl that I've seen before include "Tool for making holes in wood" , "Boring article" , "it has a point" , "One may be boring" , "Piercing tool" .)