Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

8.1.1 Divergent Product Structures, Primary Products, By-Products, and Waste Products

Intended learning outcomes: Differentiate between primary product, by-product, and waste product. Explain the manufacture of by-products in chemical production. Describe the manufacture of by-products in the sheet-metal working industry. Identify the production of collets from a steel cylinder as well as the “saucepan and lid” problem linked with temporary assembly.


One of the characterizing features of the processor-oriented concept is divergent product structure. This type of structure is an upside-down arborescent structurewith by-products.

A primary product is the product that the production process is designed to manufacture. 

A by-product is a material of value produced as a residual of or incidental to the process producing the primary product. A waste product is seen as a by-product without any value.

Manufacture of by-products is the simultaneous creation — that is, in the same manufacturing step — of further products in addition to the primary product.

The process often starts with a single commodity (raw material or inter­mediate product), although sometimes several commodities are processed together. The resulting products can be either intermediate products or end products. In some cases, a number of by-products (frequently steam or power) arise in addition to the primary product(s). By-products do not go directly into other products, but they can be recovered, utilized, and recycled in subsequent production processes. In contrast to by-products, which can reenter into the production process either directly or after appropriate treatments, waste products must be disposed of. Waste treatment and disposal engender additional costs.

The first example in Figure 8.1.1.1 stems from the chemical process industry.

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Fig. 8.1.1.1        Chemical production process: reactor with distillation column.

Here, the production of by-products is the result of physical and chemical reactions, or occurs through the changeable operating states of the production equipment. The processor can produce three grades (A, B, and C) of a certain fluid product. Basic material G moves from a feed tank (buffer) to the reactor. The chemical reaction produces the desired material, but also by-product N, which is separated out through the aid of a distillation column, by supplying heat and generating vapor. N exits the distillation column and the production unit.


Example for manufacture of by-products: Mineral oil
The preparation of mineral oil is a typical example of manufacture of by-products: a minimum of two products are produced at the same time in one step of a production process. The following Flash animation illustrates how a multitude of products are manufactured from a single base material (raw oil) in a production process that has many steps. The presentation clearly shows that manufacture of by-products is typically connected with divergent product structures. This is even more impressive considering that most refinery products are themselves raw materials for entire industries (e.g., plastics).



A change of product from one grade to another without shutting down the reactor involves resetting temperature and pressure. Transitional materials are obtained as a result of these changes. These materials are of a lesser quality, and later they will have to be mixed with a sufficient quantity of high-grade materials, which will be produced once operations reach a stable state. This means that a large quantity of each grade must be produced before the next change of product. Figure 8.1.1.2 shows the flow of goods using MEDILS notation (see Section 4.1.2).

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Fig. 8.1.1.2        The manufacture of by-products in chemical production.

The second example is taken from sheet-metal working. Here, washers are stamped from a strip of metal. In this case, beyond the technical process itself, by-product production makes economic sense: it allows the fullest possible utilization of the raw material. Figure 8.1.1.3 shows a section of the metal strip after a typical stamping operation.

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Fig. 8.1.1.3        Washers stamped from a strip of sheet metal by a stamping press.

To utilize more of the strip when producing washer X, a small washer Y is stamped inside each large washer. In addition, the press stamps other washers, of a size determined by the honeycomb principle, between the larger washers. As a result, 5 parts are obtained from each pass of the stamping machine: 2 each of part X and part Y and 1 of part Z. This can be expressed as the goods flow shown in Figure 8.1.1.4. The waste product obtained is the stamped sheet metal strip B′. There is an interesting parallel here to our first example: This stamping procedure makes sense only if the washers are separated out according to size. In the first example, it was necessary to separate the primary products (A, B, and C) from by-product (N).

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Fig. 8.1.1.4        The manufacture of by-products in the sheet-metal working industry.


Exercise: Manufacture of by-products in mechanical industry
Try to produce a washer stamping pattern in such a way that the least amount of waste is produced. Be aware, however, that the need for the individual washers varies and over-production should be avoided.
The Flash animation shows a part of a continuous metal sheet from which the washers, etc. are cut.



The third example shows the production of split steel collets, which are used for tool holding and disengaging. Figure 8.1.1.5 shows a typical production process that yields a number of different sizes of collets. Here, reasons of economy dictate the production of by-products.

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Fig. 8.1.1.5        Production of collets from a steel cylinder.

Collets S1, S2,…, Sn, each of different diameter d1, d2,…, dn, can be produced from a round bar M of diameter D. Here, again, the decision to produce by-products is based on economy. Once production has been set up, collets of various diameters can be produced with negligibly short setup times. Since various collet diameters are produced together, the possible batch size is relatively large. This minimizes the share of setup for each collet. At the same time, only a few collets of each size are produced, which keeps down the carrying cost for each size and for production as a whole. Figure 8.1.1.6 shows the flow of goods for collet production.

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Fig. 8.1.1.6        Production of collets from a steel cylinder.

The fourth and last example is temporary assembly, taken from the manu­facture of precision machines. Here, components at low production structure levels may have to be put together for mutual adjustment, disassembled again, and sent on for further processing. At the latest at final assembly, the fitted components are rejoined. This is the typical “saucepan and lid” problem, as formally shown in Figure 8.1.1.7. The saucepan and the lid have to be produced at the same time since they have to be matched to each other. However, they may then pass through other, quite different orders before they are finally assembled.

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Fig. 8.1.1.7         Temporary assembly: the “saucepan and lid” problem.

There are thus a number of reasons for producing by-products in the process industries. In many cases, the reason lies in the nature of the chemical, biological, or physical processes in the various stages of processing. However, there may be economic factors that demand appropriate processing techniques.



Course section 8.1: Subsections and their intended learning outcomes

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