By-Products

A by-product is a secondary product derived from the production process of the main product. The value of the by-product should be minor compared to the main product. For example, when producing steel screws in a turning process scrap metal particles will also be generated. This scrap metal can be considered as a by-product of steel screw manufacturing process as long as they can be sold as-is, recycled or used for other purposes.

A by-product is technically included in the Bill of Material (BOM) of the main product with a negative quantity per assembly. In IFS/Manufacturing Standards by-products are defined with a positive quantity per assembly separately from the components on the Produced Parts tab on the Product Structure, Configuration Structure and Recipe Structure pages. When a shop order is created for the main part, by-products are copied to the Shop Order/Produced Parts tab according to the selected structure revision and alternate.

By-products can be produced anywhere in the manufacturing process of the main part, hence, it can be connected to the operation where it is produced. If not connected, the system assumes it is produced in the last routing step and received together with the main product. If you want to receive by-products together with the reporting of completed quantities and receipts made from the Shop Floor Workbench page, enable the Default Receive By-Products option on the Site/Manufacturing page.

IFS/Dynamic Order Processing (DOP) does not support the use of by-products.

Supply

By selecting the Use as Supply in MRP option for the given by-product, it is possible to define it as a supply to be used in MRP. Furthermore, by enabling Use as Supply in MRP, MRP will use that by-product supply for future demands that comes for the part which was defined as a by-product.

After creating the shop order from the shop order requisition (created for the parent part by MRP), by enabling or disabling the Use as Supply in MRP option the planner has the option to consider using the by-product supply from the shop order in the next MRP run. By default the Use as Supply in MRP option is getting the enabled status from the structure by-product line.

Note: Use as Supply in MRP option cannot be enabled in the Product Structure page Produced Parts tab if this part has a structure and the parent part is already defined as a by-product at a lower level. For example, in the structure of Part A, Part B is defined as a by-product and in the structure of the Part B, Part A defined as a by-product, and therefore it is not possible to enable the Use as Supply in MRP option in such a situation. This can be sorted out in a way such that once the shop order is created for the parent part (in the example for part A) planner can enable Use as Supply in MRP on the Product Structure page Produced Parts tab for the by-product (in the example part B) so that in the next MRP run it will be considered as a supply. Here, planner should carefully create shop orders and should enable or disable Use as Supply in MRP option to have a good use of by-products being manufactured during the manufacturing process.

Cost Distribution

General Information

The valuation of manufactured products can be determined by using cost distribution factors. The cost distribution factors provide a means of distributing costs of materials, operations and general overhead cost between the by-products and the main product. When not using cost distribution, the valuation of the main product is determined by removing the standard cost of the by-products from the sum of the material, operation, and general overhead costs.

The cost distribution method requires identification of a portion of costs for material, operation, and general overhead costs to be allocated for each by-product on a manufacturing structure or a shop order with the remaining costs allocated to the main product. Separate factors are used for material, operation, and general overhead costs. The cost distribution method can be identified to be used for product structures, recipe structures, and configuration structures as well as for shop orders.

If cost distribution is enabled for a specific product, then the cost for the product in costing and the weighted average cost for the product and the by-products will be calculated using the distribution as mentioned above. Also the shop order estimate cost calculation will use the cost distribution method.

Basic Data Requirements for Cost Distribution

The by-product cost distribution is enabled by enabling the Use Cost Distribution option for the relevant alternate on the Product Structure, Configuration Structure of Recipe Structure pages.

The value to determine how much operation cost or general overhead production cost should be allocated is decided by entering the value in the Operation Cost Distribution Factor field or General OH Cost Distribution Factor field on the Produced Parts tab of the Product Structure and Configuration Structure pages, and By-Product tab of the Recipe Structure page.

The value to determine how much component material cost should be allocated is decided by entering the value in the Cost Distribution Factor field on the Component Cost Distribution tab on of the Product Structure and Configuration Structure pages.

The value to determine how much component material cost should be allocated is decided by entering the value in the Cost Distribution Factor field on the By-Product Cost Distribution tab on of the Recipe Structure page.

The cost distribution factors cannot allocate more than the total costs. Therefore, the sum of each type of cost distribution factor cannot total more than 100%. This means that, for a single structure, the sum of the operation cost distribution factors cannot be greater than 100%. Similarly, the sum of the general overhead distribution factors cannot be greater than 100%. For each component on the structure, the sum of the item cost distribution factors cannot be greater than 100%.

Cost Distribution Process

During shop order cost calculations for estimated cost or weighted average actual cost, each of the shop order costs (component, operation, or general overhead) is multiplied by the appropriate cost distribution factor to determine the allocation for each by-product. Any remaining cost is allocated to the main product.

For example, suppose that product A has two by-products, B and C, and two components X and Y. The cost distribution factors are as follows:

The general overhead cost distribution factors for B and C are both 0 (zero).
The operation cost distribution factors for B and C are 0.25 and 0.3 respectively.
The cost distribution factors for B and C for component X are 0.1 and 0.2 respectively.
For component Y, the cost distribution factors for B and C are 0.1 and 0 (zero) respectively.

If Use Cost Distribution is enabled, then during the shop order cost calculations, the costs would be calculated as follows:

Product A will get the entire amount of the general overhead cost.
By-product B will get 25% of the operation cost (operation cost times 0.25).
By-product C will get 30% of the operation cost (operation cost times 0.3).
Therefore, product A will get the remaining 45% of the operation cost (Operation cost - (Cost allocated to B + Cost allocated to C)).
By-product B will get 10% of the cost for component X and 10% of the cost for component Y ((Cost for X times 0.1) + (Cost for Y times 0.1)).
By-product C will get 20% of the cost for component X and none of the cost for component Y ((Cost for X times 0.2) + (Cost for Y times 0)).
Therefore, product A will get the remaining 70% of the cost for component X (Cost for X - (Cost allocated to B + Cost allocated to C)) plus the remaining 90% of the cost for component Y (Cost for Y - (Cost allocated to B + Cost allocated to C)).

If Use Cost Distribution is not enabled, then during the shop order cost calculations, the costs would be calculated as follows:

By-products B and C will each use their respective inventory values.
Product A will get the remaining costs (Total cost - (Value of B + Value of C)).