Producing Multiple Finished Goods from a Single Raw Material
Certain manufacturing industries produce multiple finished goods from a single raw material during the same production process. This is common in industries such as chemical processing, petroleum refining, and food processing, where one input material is transformed into several usable products.
ERPNext supports this manufacturing scenario by allowing one finished good to be defined as the primary output while recording the remaining products as by-products in the Scrap section of the Bill of Materials (BOM).
Example Scenario
Consider an oil refinery where Crude Oil is the raw material. During the refining process, multiple finished products are obtained simultaneously, such as:
- Petrol
- Diesel
- Gas
- Kerosene
Although all these products are generated from the same manufacturing process, ERPNext requires one product to be treated as the primary finished good while the remaining outputs are recorded as by-products.
Step 1: Create Item Masters
Begin by creating Item Masters for both the raw material and all finished products involved in the manufacturing process.
- Create Crude Oil as the raw material.
- Create separate Item Masters for Petrol, Diesel, Gas, and Kerosene.
- Assign the appropriate Unit of Measure (UOM) for each item based on business requirements.
Each finished product can have its own Unit of Measure (UOM), allowing manufacturers to manage production and inventory accurately even when different products are measured differently.
Step 2: Create the Bill of Materials (BOM)
Create a BOM for the primary finished good that will represent the manufacturing process.
For example, create a BOM for Petrol where:
- The finished quantity is 25 Litres of Petrol.
- 100 Litres of Crude Oil is added as the raw material.
This BOM defines the primary manufacturing output while consuming the required quantity of crude oil.
Step 3: Record Additional Finished Goods as By-Products
The remaining products generated during manufacturing, such as Diesel, Gas, and Kerosene, should be added in the Scrap section of the BOM.
Although labeled as “Scrap” in ERPNext, this section can be used to record valuable by-products that are produced alongside the primary finished good.
The Scrap section is not limited to waste materials. It can also be used to capture commercially valuable by-products generated during the manufacturing process.
Step 4: Define Manufacturing Operations
If the manufacturing process involves multiple production stages, operations can be added to the BOM.
These operations are used during Work Order execution to define the production workflow, estimate manufacturing time, and track operational activities.
Step 5: Execute the Work Order
Create and process a Work Order using the configured BOM.
During production, the Work Order follows the defined manufacturing operations and prepares the system for inventory updates upon completion.
Backflush and Production Completion
When the production process is completed and the backflush entry is performed, ERPNext automatically:
- Consumes the required quantity of the raw material.
- Produces the primary finished good defined in the BOM.
- Creates inventory entries for the additional by-products listed in the Scrap section.
This enables manufacturers to accurately account for all products generated from a single manufacturing process while maintaining correct inventory records.
Business Benefits
- Supports manufacturing processes with a single raw material and multiple outputs.
- Tracks both primary products and valuable by-products within one production cycle.
- Allows different Units of Measure for individual finished goods.
- Supports operational planning through BOM operations and Work Orders.
- Automatically updates inventory during the backflush process.
Key Summary
ERPNext enables manufacturers to manage production scenarios where one raw material generates multiple finished goods. By defining one product as the primary output and recording the remaining products as by-products in the Scrap section of the BOM, businesses can accurately execute Work Orders, consume raw materials, and maintain inventory for all production outputs within a single manufacturing cycle.
