Many manufacturing processes, especially in basic industries, produce more than one output. For example, chemical plants often produce a basket of chemicals. This is a result of breaking chemical compounds into smaller molecules. These other products are called byproducts. And by-product pricing strategies can have a significant impact on your profitability.
Two common cases: food waste and recyclable scrap. Food waste can be fed to animals. Many cutting and shaping processes produce scrap. Scrap can often be put back into the machine that created the original roll of material. In the paper industry, we call scrap “broke”. Our broke went back into the paper mill, saving us money on fiber.