That is because you didn't reset your $template, so your regex didn't match %%DESCRIPTION%%. Use can use a tmp variable to reset $template.

open (TEMPLATE, "<$template_file") or die "Can't open $template_file: 
+$!";
  $template = do { local $/;  <TEMPLATE> };
  close TEMPLATE;

  $tmp_template = $template; #store the template

  opendir (BIN, "$prod_dir") or die "Can't open $dir: $!";

  while (defined ($file = readdir BIN)) {
          next if ($file =~/^\.\.?$/); #skip file starting with period
+s

          open (DESCR, "<$prod_dir/$file") or die "could not open $dir
+/$file: $!";
          
          $description = do { local $/;  <DESCR> };

          $template = $tmp_template; # restore the template

          $template =~ s/%%DESCRIPTION%%/$description/;
          
          open (OUTPUT, ">$output_directory/$file.html");
          print OUTPUT $template;
          close OUTPUT;
          
          next;
  }

  closedir (BIN);
[download]