I am currently in project at a large production company, working to implement D365 Supply Chain into their business.

The use case is:

"With each production order, some by-product is always produced. The by-product can be reused into production, and will then be weighed out as an ingredient. It can be used in a new production order for the same formula-product, or a similar one. Whether one will use the by-product as an ingredient in a production order or not, depends on the amount of production order available, and there will be ran production orders where by-product will not be used as an ingredient at all. However, by-product is always produced! And it has a cost. So the recycled product should be optional to use as an ingredient in the formula, but the by-product that is produced in the production order should always carry part of the production cost."

At first sight, the "recycled by-product" functionality in D365 seemed like a great solution to our scenario.

However, is has some limitations:

• If the by-product is not both consumed as an input in the formula and and produced as an output of the formula, then the main product takes all the cost of the production order, despite that the by-product has been produced. In our case this is a problem, as the by-product is recyclable; hence it is not considered just a burden, and the cost of the main product should be reduced by the amount of recycled by-product produced. Because the recycled product is reused later. It should carry the same cost as the main item it came from, or a given percentage of it, or a cost defined per site in a cost-version, or just a cost set on item level. It could be a parameter on how the cost should be set, and some parameters to tweak regarding percentage of cost compared to main item etc.
• In todays solution, the by-product of burden recycled must must have cost model standard cost. This is a limitation. This should be generalized to all cost models. In our case FIFO and actual cost is used, and applies to all other items. If a cost in a costing version must be required, then the item could have an activated cost in a planned costing version for instance. (As an alternative, I also tested to use co-product instead, but then you are not allowed to use a product as both input and output in the formula. In addition the total cost allocation only works if you have activated costs for both the main item and the byproduct. The other option would be to constantly change the percentage of cost allocation between them manually.)

The enhancements suggested would make the recycled byproduct functionality more flexible and more suitable to fit several scenarios of recycled production!

Despite that the company I am working with are actually performing formula-production, with recycled products, the limitations of the solution for recycled by-products in D365 forces them to use the BOM-functionality with some more complicated work-arounds and extra steps instead of the formula functionality. I believe the formula-production functionalities of the system should be extended to be good enough to actually support companies producing formulas. In the microsoft learning site I linked there are comments suggestion the same adjustments dated ten years ago, because they have a similar scario as described here. Doesn't seem like there has been done any changes in the standard solution yet - so maybe it is time?