Understanding Co-Products and By-Products in SAP PP

In manufacturing processes, it’s common for multiple products to emerge from a single production run. SAP PP (Production Planning) offers a robust system to manage the complexities of co-products and by-products, impacting costing, inventory management, and production decisions.

What are Co-Products?

• Co-products are valuable products manufactured alongside the primary or main product within a production process.
• They have significant economic value and contribute to the overall profitability of the production run.
• Examples: In an oil refinery, along with gasoline (the main product), diesel, kerosene, and other petroleum products would be considered co-products.

What are By-Products?

• By-products are also produced alongside the main product but typically have a lower economic value.
• They are often considered incidental to the primary production goal.
• Examples: Sawdust from a lumber mill or molasses from sugar refining.

SAP PP Configuration

1. Material Master:

• • MRP 2 View: Designate a material as a co-product by selecting the ‘Co-product’ checkbox.
  • Accounting 1 View: Assign appropriate price control to both co-products and by-products.

1. Bill of Materials (BOM):

• • Co-products: Included in the BOM with their standard quantities.
  • By-products: Included in the BOM but with negative quantities, indicating their generation during the process.

1. Production Order:

• • Creating a production order for the main product automatically handles co-products and by-products.
  • Separate order items are generated for co-products.
  • By-products can be monitored but don’t have separate order items.

Benefits of Using Co-product and By-product Functionality in SAP PP

• Accurate Costing: Allocates costs more precisely, reflecting the value of each product.
• Improved Inventory Management: Tracks co-products as separate inventory items for precise stock visibility and planning.
• Settlement: Enables settlement of co-products to different receivers for better cost analysis and profitability tracking.
• Decision-Making: Provides insights into the costs and yields of co-products and by-products, contributing to informed production planning decisions.
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