Semi-finished products are standalone, manufacturable items in SAP Business One that are created as intermediate products in a multi-stage manufacturing process. They are produced in separate Production orders manufactured, booked into inventory as an access point and subsequently consumed as components in higher-level manufacturing stages. They thus fulfil two roles: they are both the result of a production order and input material for the next one.
Context and meaning
Semi-finished products make multi-stage production cleanly mappable systemically. Instead of maintaining a complex end product in a single huge bill of materials, the process can be divided into logical intermediate stages – with their own bills of materials, their own costs, and their own inventory management. This creates transparency over the value creation along the production chain and allows intermediate products to be sold externally or passed on to other product lines as needed.
Stock (OITM/OITW) is moved at two points: entry after own production and exit upon consumption in the next stage. In terms of cost, semi-finished goods accumulate the material, resource, and overhead costs of their own manufacturing process. These costs flow into the Work-in-Process (WIP) and ultimately into the self-cost of the final product — this enables precise cost calculation across multiple production stages.
Master data prerequisites
- Master data (OITM) Each semi-finished product must be created as an independent stock item – with its own item number, valuation method, and inventory transaction rules.
- Own production parts list (OITT/ITT1): A „production" bill of materials is stored for each semi-finished product, which contains all components and resources required for its manufacture.
- Role as a Component At the same time, the semi-finished product appears as a component in the bill of materials of the parent end product or of a further semi-finished product – this creates multi-stage production trees.
- Output method (ITT1.IssueMthd): As with any component, it decides whether consumption is posted manually or processed automatically via backflushing.
- Resources (ORSC): Working hours, machine hours and manufacturing overhead are assigned to bills of material or orders via resources – this is the basis for overhead allocation and realistic manufacturing costs.
Two-stage manufacturing process
Semi-finished products follow the regular production order lifecycle, albeit in multiple stages. The typical process is divided into two consecutive production cycles:
Stage 1: Manufacture of the semi-finished product
- Create Manufacturing Order (OWOR) Manual or MRP run — Status: Planned.
- Release order: Status changes to Released, the components are reserved.
- Material sample The components required for the semi-finished product are removed via goods issue production.
- Feedback: The completed semi-finished product is reported back via goods receipt production - the stock of the semi-finished product increases, and the costs are booked.
- Complete order Upon full feedback, the order will be Completed set.
Stage 2: Manufacture of the final product
- Create production order for finished product: The previously produced semi-finished product now appears as a component in the end product's bill of materials.
- Material sample The semi-finished product is taken from storage and assigned to the production order of the final product.
- End product feedback: The finished end product is booked into the warehouse – its manufacturing costs now also include the accumulated costs of the sub-assembly used.
In correspondingly complex manufacturing processes, further intermediate stages can be inserted – each with its own production order, own feedback, and own cost accumulation.
MRP and multi-level planning
The MRP run is particularly valuable for multi-level manufacturing. It recursively resolves the demand for the end product: first, the demand for semi-finished goods is determined, then the demand for the components of these semi-finished goods. For each level, production order recommendations are generated – including the correct start date, which takes into account the lead time of the respective manufacturing level. This creates a time-coordinated production plan across all levels.
Practical tip
Always create semi-finished products as standalone articles if one of the following conditions is met: The intermediate product is warehoused, it will also sold to external parties, it will in several end products deployed, or the Manufacturing costs should be itemised separately Whilst a single monolithic Bill of Materials saves initial maintenance effort, it makes cost analysis and capacity planning practically impossible with multi-stage production.
Demarcation
Semi-finished goods are not Raw materials — they only arise in the company's own manufacturing process and carry its material and resource costs. They are also not identical to Sub-assembliesThe term overlaps, but „semi-finished product" emphasises the business management perspective (a valued intermediate product with its own inventory management), whereas „sub-assembly" refers more to the technical structuring. Similarly, to be differentiated are Work-in-Process inventories (WIP): WIP is not a standalone article, but a Condition — Open production orders that have not yet been reported back. A semi-finished product, on the other hand, exists as a physically completed, stored product with a fixed article number.