Starting with the definition
A by-product or byproduct is a secondary product derived from a production process, manufacturing process or chemical reaction; it is not the primary product or service being produced.
By-products are materials of value that are produced as a residual of, or incidental to, the production process.
A lot of times, it's called reused waste. By-products can be recycled, sold as is, or used for other purposes.
Some industries lives with this reality and most of them has a policy of Zero Waste, maximize productivity and therefore being cost and competitive effective.
Some examples: metal, wood, paper leftovers after cutting process.
This post will describe how By-Products can be managed inside Dynamics 365 Business Central.
The first feature to consider is Production Bill of Materials (BOM).
All the basics to handle Productions Bill of Materials in BC is described https://docs.microsoft.com/en-gb/dynamics365/business-central/production-how-to-create-production-boms.
This example, contains the setup for a Parent Item 10000 where it is expected to be required 2 PCS of component 000100-40 more 10% scrap, 3 PCS of component 000100-45 more 5% scrap. But the third line, it has the proposed setup for a By-Product: -1 PCS of By-Product 00100-50.
If the request for Parent Item is 100 PCS, BC will easily calculate the demand for all the lines included in this Production BOM:
Component 000100-40: 100 * 2 + 100 * 2 * 10% = 220 PCS
Component 000100-45: 100 * 3 + 100 * 3 * 5% = 315 PCS
And at the same time, it will calculate the expected output for the By-Product 000100-50: 100 * -1 = 100 PCS.
This way to configure will allow everything you need to manage correctly the By-Products:
Parent Item Cost calculation will consider the cost of all components less the cost of the By-Products
Production Orders created will have the expected components requirements and at the same time the expected by-products outputs
Consumption Journals will allow to consume the real components and consume negatively the real By-Products. The negative consumptions will work as an output or an increase to stock level.
Try yourself.