Navigating the Split Stream: Joint Production in SAP PP

In the world of manufacturing, not all processes are clear-cut. Sometimes, a single production run yields multiple products. This is where the concept of joint production comes in. In SAP PP (Production Planning), handling these joint processes requires specific configurations to ensure accurate cost allocation and inventory management.

Understanding Joint Products and By-Products

Joint production involves creating two or more products (co-products) simultaneously from a single raw material input. These co-products have commercial value and are deliberately planned for production. On the other hand, by-products are secondary outputs with a lower value than co-products. They may arise unintentionally during the process but can still be saleable.

Configuring Joint Production in SAP PP

SAP PP offers functionalities to manage both co-products and by-products. Here’s a breakdown of the critical steps:

1. Material Master: The foundation lies in defining materials as co-products or by-products in their respective master data. This is achieved by setting the appropriate indicator in the material master record.
2. Bill of Materials (BOM): The BOM for the leading co-product needs to include the other co-products and any by-products. Co-products are listed as positive items, while by-products are represented with harmful quantities.
3. Costing: Joint production costing involves allocating the total cost to individual co-products. SAP PP allows for using apportionment structures defined in the material master to achieve this. These structures specify the method for dividing the costs based on factors like weight, sales value, or other relevant criteria.

Benefits of Using SAP PP for Joint Production

• Accurate Costing: By properly allocating costs, SAP PP helps determine the profitability of each co-product, leading to better decision-making.
• Efficient Inventory Management: Real-time tracking of co-product and by-product inventory levels ensures optimal production planning and avoids stockouts.
• Improved Financial Reporting: With accurate cost allocation, financial statements reflecting the true profitability of co-products are generated.

Conclusion

Joint production in SAP PP requires specific configurations but offers significant advantages. By understanding the concepts and implementing the necessary steps, manufacturers can gain better control over their production processes, costing, and inventory management.