Combined and Joint Production
To examine the implications of a variation in the demand for a specific product, it is essential that the production system generates only that particular product as output. In cases where the system generates more than one output product, it is necessary to isolate the product of interest from the other byproducts.
There are two main situations of coproduction: combined production and joint production.
- In combined production, the quantities of the byproducts can be varied independently, and all products are thus considered determinants, acting independently from one another. The consequences of an isolated demand variation for each of the combined products must be modeled separately, as each product will follow specific physical causes. This results in a separate dataset for each of the combined products.
- In joint production, the quantities of the byproducts cannot be varied independently (that is, the proportions are fixed). In most cases, one of the byproducts can be identified as the determinant product, and the remaining dependent byproducts can be eliminated by substitution (see byproducts, recycling, and waste). In some special situations (with more than one byproduct without alternative production), joint production may have more than one determinant product, and the consequences of a demand variation for each of them must be modeled separately.
Multiproducts from Combined Production
In combined production, the quantities of the byproducts can be varied independently, and all the products are therefore determinants, independently from each other. Combined production of most byproducts is generally carried out to take advantage of some coproduction benefits, such as using the same instrumental goods, reducing energy or raw material consumption, or decreasing waste production. Since a description of separate pure production would not encompass these benefits, it would not provide a correct representation of the actual conditions. Therefore, modeling must include specific consequences (changes in unit process exchanges) resulting from modifying the output of the co-product of interest while keeping the output of the other co-products constant. In this way, the benefits of combined production will be intrinsic to the description and will be reflected in the outcome. This effectively involves dividing the activity based on physical causality, as modeling can be repeated independently for each of the combined byproducts, obtaining a dataset for each byproduct.
In general, a physical parameter that – in a given situation – is the limiting factor for coproduction can be identified. It is the contribution of the byproduct of interest to this parameter that determines the consequences of the studied change.
Multiproducts from Joint Production
In the context of joint production where multiple products without alternative production are generated along the pathways, each representing a determinant, the markets related to such products can only be defined through variations in the consumption of all involved determinants. For joint byproducts without relevant alternative pathways, their prices will adjust until all byproducts follow the same standardized market trend, as only then their markets will be clear. In this scenario, a variation in the demand for one of the byproducts will influence joint production in proportion to its share of total revenue. This results in an economic breakdown of the coproduction process.
Furthermore, there will be an adjustment of consumption through constrained markets for byproducts, maintaining a balance between demand and supply and preserving mass balances in the economic division process. Changes resulting from variations in the demand for one of the determinants can be modeled based on the revenues provided by that determinant compared to the total revenues of all determinants. This ratio acts as a scaling factor on joint production activity, reflecting that a change in the demand for one of the determinants will influence production in proportion to its share in the total revenues of the determinants. Joint production at scale thus responds to a specific increase in demand for its determinants with lower production than necessary to meet the demand. Without alternative production pathways, the missing supply must be compensated by a reduction in consumption by other users of the required product, influenced by price signals resulting from increased demand. Users reducing their consumption are identified as marginal consumption activities, parallel to marginal suppliers: those with the lowest alternative costs associated with not using the product in question and therefore are more sensitive to price variations caused by demand.
As a result, the market activity related to the key product is influenced by both joint production and the input resulting from the reduction of marginal consumption needed to compensate for the lack of supply from joint production. It is important to note that, with this approach, joint production is not fragmented, but only resized in response to demand variations, remaining a multiproduct activity. To achieve a single-output activity focused solely on the key product, the other byproducts are modeled as negative inputs rather than positive outputs. This means that the system is expanded.
For each dependent byproduct, this involves shifting the unencumbered alternative supply, similarly to what would happen if the dependent byproduct was the result of an activity with a key product. However, the remaining key products (those for which there has been no demand variation) do not have alternative production pathways to shift. Since the products do not accumulate and markets need to be cleared through price adjustments, additional production instead leads to an increase in consumption in marginal consumption activities. The remaining key products (those for which there has been no demand variation), now modeled as negative inputs to joint production activity, are linked to their respective marginal consumption activities, thus representing the induced consumption change.
In the context of modeling a marginal consumption activity, the supplied product becomes the main factor influencing that activity, determining additional consumption. The initial output, which was the main determinant of the marginal consumption activity, will no longer hold this central position. Instead, it will represent the resulting change in consumption, potentially to be defined as a social impact, unless it can be autonomously modeled as a byproduct. Since the specific consequences of demand changes must be analyzed separately for each determinant product, applying the described procedure to all determinant products in a joint production will require a separate dataset for each determinant product. Each of these datasets will reflect the consequences of a demand change for one of the determinant products.
