A brand's own ingredients and packaging, reconciled run by run against its formula.

On a tolling or co-packing deal, the plant holds stock it doesn't own. Pallets of the brand's ingredient arrive under the brand's lot codes, roll stock and labels arrive by the thousand, and every run draws them down. The batch sheet shows what went into the kettle, the formula shows what the cases produced should have taken, and the agreement says how much loss the brand accepts on each material. After a campaign or at month end, someone lines those up and writes the balance the brand will see.

For the test, AI reads copies of those records for runs your team already reconciled and drafts each brand's statement: opening balance, receipts by lot, theoretical use from the formula and the cases made, actual use from batch and packaging records, recorded waste, and the closing balance, with the document behind every figure. A balance that won't tie, a receipt without a lot code, or loss beyond what the agreement allows lands on a list for your reviewer. Nothing is posted, and no brand hears from the test.

The agreement sets the loss the brand will carry. Agreements filed publicly with the SEC show how exact these terms get. One bottling agreement from 2002 sets a shrinkage allowance line by line, from citric acid and CO2 priced by the kilogram to bottles by the gross and labels by the thousand. It has the bottler review its stock of every material seven days before each scheduled run and report any shortfall in what the brand must supply, lets the brand's people take physical inventories of raw materials and finished goods, and says the bottler isn't answerable for loss beyond those allowances when the condition of the brand's own materials caused it. A processing and packaging agreement from 2007 prices the work as a toll per pound over packaging and ingredients, carries a shrink allowance for packaging and one for ingredients that holds until a statistical database is established, and bars the plant from selling or disposing of the brand's packaging without written consent. So the draft reads your agreement first and measures each material's loss against the allowance it names, in the unit it names.

Traceability rules want the same numbers by lot. For foods on FDA's Food Traceability List, the rule in 21 CFR Part 1, Subpart S, has the receiver record, among other entries, each lot's traceability lot code, quantity and unit of measure, immediate previous source, receiving location and date, and reference document. When those foods go into a new product, the plant assigns a new lot code and records, for each lot used, the quantity taken from it. FDA has said it will not enforce the rule before July 20, 2028, as Congress directed. Where it applies, the reconciliation and the traceability record rest on the same receipts and batch entries, so the draft ties every draw to the brand's lot code instead of a pooled total.

Rework and holds move material between runs. FDA's manufacturing practice rule requires material scheduled for rework to be identified as such, and rework containing a food allergen to be identified and held in a way that prevents allergen cross-contact. The supplier and co-manufacturer expectations that John B. Sanfilippo & Son publishes define its contract manufacturers as third parties that process ingredients it owns, ask that the type and quantity of rework a product may take be set out in its formula or spec, and require inventory reconciliation of material on hold. The draft follows each tote of rework from the run that made it to the run that used it, and keeps held material on its own line, never in the loss column.

Some plants are audited on the same arithmetic. At an organic handler's yearly inspection, the certifier must verify mass balance under USDA's organic rule: organic ingredients produced or bought have to account for what was used, stored, sold or shipped, and the certifier must be able to trace them back to the last certified operation. If your plant also makes dietary supplements, FDA's rule for them puts a theoretical yield, with the limits that trigger a deviation investigation, in the master manufacturing record, and puts the weight of each component used, the actual yield and the labels used, reconciled where label reconciliation applies, in every batch record. The draft reads those records where you keep them, and sends a batch outside its own yield limits to QA instead of booking it as loss.

The books may treat the brand's stock apart from yours. Under the revenue standard, ASC 606-10-32-24, when a customer contributes materials to help fulfill a contract, the company doing the work assesses whether it obtains control of them, and only then are they accounted for as noncash consideration. Your accountants make that call; the draft only keeps the brand's materials separate from anything your plant bought. Your reviewer, usually the materials manager, the plant controller or the account lead who sends the brand its statement, checks that each receipt matches the brand's shipping record, that theoretical use follows the formula revision that actually ran, that waste is counted once, and that every gap left is listed with its documents for the person who answers to the brand.

Once your reviewer agrees, each run or month end for the brands in the test is reconciled the same way for about 30 days.

Each statement stops with the person who answers to the brand, who decides what goes out, what gets explained and what is billed or credited. The draft settles nothing.

The side-by-side check keeps going on live runs, and no other job is added until the month is done.