Secondary Items

Note: This feature is available from ERPNext Version 16.

Secondary Items in ERPNext allow manufacturers to define additional outputs that are produced alongside the primary finished product during the manufacturing process. Starting from Version 16, the previous Scrap Items table has been renamed to the Secondary Items table and expanded to support multiple output types with flexible cost allocation.

Using the Secondary Items table, manufacturers can allocate the raw material or production cost among the primary finished good and other outputs based on predefined allocation percentages, resulting in more accurate product costing and inventory valuation.

Secondary Item Types

ERPNext supports four different types of secondary items.

Scrap

A Scrap item is generated alongside the finished product during manufacturing. Scrap typically has little or no commercial value but may still be tracked for inventory and accounting purposes.

Co-Product

A Co-Product is intentionally manufactured together with the primary finished good and has significant business value. Both products are considered planned outputs of the manufacturing process.

By-Product

A By-Product is produced alongside the finished product but is generally not the primary objective of manufacturing. Depending on the production process, it may or may not have significant commercial value.

Additional Finished Good

An Additional Finished Good is another planned finished product created during manufacturing. It is typically produced using additional materials, leftover production capacity, or further processing and has substantial value.

Configuring Secondary Items

The Secondary Items table allows users to define additional manufacturing outputs directly within the Bill of Materials (BOM).

For each Secondary Item, users can configure:

• Secondary Item Type (Scrap, Co-Product, By-Product, or Additional Finished Good).
• Process Loss Percentage.
• Cost Allocation Percentage.

These settings determine how production costs and output quantities are calculated during manufacturing.

Cost Allocation

One of the major enhancements introduced in Version 16 is the ability to distribute manufacturing costs across multiple production outputs.

Instead of assigning the entire raw material cost to the primary finished product, ERPNext allows users to allocate a percentage of the outgoing production cost to each Secondary Item.

The remaining cost is automatically assigned to the primary finished good.

Example

Suppose the total outgoing raw material cost for manufacturing is ₹100.

The Secondary Items are configured as follows:

• LPG receives 10% of the production cost.
• Bitumen receives 5% of the production cost.

ERPNext automatically calculates the cost distribution:

• LPG receives ₹10.
• Bitumen receives ₹5.
• The remaining ₹85 is assigned to the primary finished product.

This allocation ensures that manufacturing costs are distributed accurately across all production outputs.

Process Loss Calculation

ERPNext also supports defining a Process Loss Percentage for individual Secondary Items.

Process Loss represents the quantity lost during production before the item is added to inventory.

For example:

• If Bitumen has an expected output quantity of 10 units.
• And a 5% Process Loss is defined.

ERPNext calculates the final quantity as:

10 − (5% × 10) = 9.5 units

This ensures that inventory reflects the actual quantity available after manufacturing losses.

Business Benefits

• Supports multiple manufacturing outputs from a single production process.
• Accurately allocates production costs across finished and secondary products.
• Improves inventory valuation for co-products and by-products.
• Tracks process loss automatically during manufacturing.
• Provides better manufacturing cost visibility.
• Supports more accurate financial reporting and product costing.
• Maintains backward compatibility for legacy Scrap Items during upgrades.

Key Summary

Secondary Items in ERPNext Version 16 extend the traditional Scrap Items functionality by supporting Scrap, Co-Products, By-Products, and Additional Finished Goods within a single BOM. Manufacturers can allocate production costs across multiple outputs using configurable cost allocation percentages while also accounting for process loss. This enhancement provides more accurate product costing, inventory valuation, and manufacturing reporting while preserving compatibility with legacy Scrap Item records.