Co‑products and By‑products

These topics describe how to manage processes that create more than one product. Topics related to material requirements planning (MRP) and work orders for co‑products and by‑products are also discussed.

Introduction to Co-products and By-products
Defines co-products and by-products and outlines some of the features and manufacturing options they support.

Setting Up a Co/By-product Operation
Describes how to set up a typical operation with co-products or by-products.

Calculating Costs and Lead Times
Describes how the system calculates co-product costs and lead times differently from those of by-products, as well as average and overall cost accounting.

MRP for Co-products/By-products
Describes how and why to avoid overplanning for some items during setup.

Managing Joint Work Order Sets
Defines Joint Work Order Sets and discusses how to create, modify, and review them as well as how to deal with unexpected events.

Restrictions
Outlines some categorical restrictions, including inventory, purchasing, repetitive, and advanced repetitive.

You can use a special set of features for managing processes that create more than one product. Such products are referred to as co‑products or by-products. Processes that create only one product are supported by regular bills of material (BOM) and formulas.

Co-product/By-product features support a variety of manufacturing operations, including:

Batch processing. Production of items by mixing, blending, and refining component ingredients, such as pharmaceuticals, processed foods, and wine.

Sorting. Separation of items by characteristics such as size, weight, or quality, such as clothing, computer chips, and produce.

Disassembly. Separation of items from larger items, such as juice and seeds from oranges.

Molding. Production of items using multiple-cavity molds such as plastics and confections.

Features include support for MRP, work orders, shop floor control, and costing, as well as tools for setting up items, structures, and routings. Great flexibility is provided in defining alternate products structures and routings. As a result, perhaps even more than with regular processes, careful planning is critical.

A base process is a manufacturing operation that creates more than one product. These products are called co-products or by-products. For this discussion, a co-product is an intended result of a base process and generally has significant value. In contrast, a by-product is an incidental result of a base process. A Base Process Produces Multiple Products illustrates a typical base process that produces two co-products.

Example: A sheet metal stamping process yields a piece of sheet metal used to make school bus window casings. The stamping process also yields two other products:

• Pieces of metal that are removed from the window hole and used to make seat brackets in another process

The pieces cut from the window hole have value, and are considered a co-product. The metal shavings have little value and an associated disposal cost, and are considered a by-product. If the shavings can be sold as scrap, the manufacturer may decide to define them as a co-product instead. See Defining Co‑products and By-products.

The co-products and by-products of a base process do not have their own product structures or routings. These are defined in the base process. Base processes are items containing formulas for co/by-product operations, and are defined in the same way as regular items. A base process has:

The BOM/formula code for a co-product is the item number of the co‑product’s base process.

• Base process items are never regarded as items to be stocked. Item status codes are used to restrict inventory transactions related to base process items and to ensure that these items never appear on sales or purchase orders. Should base process items end up in inventory, or on sales or purchase orders, they are ignored by MRP.

Demand for co-products drives the planning of base processes, and the co-product that has the most demand is the one planned for.

Example: Base process X produces two co-products, Y and Z. Since there is greater demand for Y than for Z, base process X is planned to produce the desired quantity of Y. The quantity of Z produced will therefore exceed demand.

A co-product can be a component of another process or product structure. For instance, for Company Q, nonvintage wine may be a co-product of the wine manufacturing process and a component of the wine cooler manufacturing process, as shown in A Co-product Used as a Component in Another Structure.

By definition, demand for by-products is not expected. If demand for a by‑product is generated, MRP treats it as demand for a normal item. MRP does not plan work orders to satisfy by-product demand.

General Workflow for Co-products/ By-products shows steps for setting up and managing a typical operation involving a base process with co-products and by-products.