A product costing approach used in Just-In-Time (JIT) manufacturing environments where material costs and labor are calculated and recorded only after production is completed, rather than tracking these costs in real-time during the manufacturing process. This method “flushes” costs backward through the system based on the actual quantity of finished goods produced.
Backflushing streamlines warehouse operations by reducing the administrative burden of tracking work-in-process inventory and simplifies material consumption reporting. Instead of recording each material transaction as it occurs, the system automatically calculates material usage based on predefined bills of materials when finished products are completed.
For example, when a warehouse completes production of 100 smartphones, the WMS automatically deducts the required components (screens, batteries, cases) from inventory based on the product’s bill of materials, eliminating the need to manually track each component withdrawal during assembly.
