A co-product is a material that is manufactured simultaneously with the main product. In certain cases, the main material cannot be manufactured in isolation (without also producing the co-product) for a given production process.
Use of Co-Products
Use in SAP PP-PI Component: A process industry manufactures one main product. However, due to the nature of the chemical and biological reactions, there is a concurrent yield of multiple other products. These products can be categorized as co-products, by-products, and waste products.
Co-products and by-products have a non-zero inventory valuation, as opposed to waste products that have a zero unit cost.
Companies assign the co-products label to the products that have a higher cost visibility than other generic by-products. Therefore, co-products are earmarked for cost settlement at the end of the process order life cycle.
Main Leading Material and Co-Product – Structure
Co-products, by-products, and waste products are set up as negative quantity components in the BOM of the master recipe. Since co-products have further cost settlements, you need to set up a series of indicators in the product masters and the BOM. You need to select the co-product indicator fields for all product masters and negative quantity components. In addition, you need to define the cost apportionment ratios for cost components involved with the co-products in their product masters.
Several terms are frequently used in the food, chemicals, and electronics, as well as in process, repetitive, and flow manufacturing industries.
To understand co-products, you need to understand the following related terms:
- Co-Product
- A co-product is a material that is manufactured at the same time as the main product. For a given production process, the main material cannot be manufactured in isolation, without also producing the co-product.
- Co-products have a non-zero inventory valuation.
- Co-products are also earmarked for cost settlement at the end of the process-order life cycle, and they appear in the header settlement rule.
- By-Product
- A by-product is a material that is manufactured at the same time as the main product. For a given production process, the main material cannot be manufactured in isolation, without also producing the by-product.
- By-products have a non-zero inventory valuation.
- By-products are not earmarked for cost settlement at the end of the process-order life cycle, and they do not appear in the header settlement rule.
- Waste product
- A waste product is a material that is manufactured at the same time as the main product. For a given production process, the main material cannot be manufactured in isolation, without also producing the waste product.
- Waste products have a zero inventory valuation.
- Waste products are not earmarked for cost settlement at the end of the process-order life cycle, and like by-products, do not appear in the header settlement rule.