Abstract
Coproduction is recognised as a sustainable technique that promotes optimal resource use by extracting value from leftover materials that would otherwise be wasted in traditional manufacturing processes. However, the sustainability of coproduction technology in supply chains remains uncertain, subject to fluctuations in suppliers' raw material prices. In this paper, we model a decentralised supply chain consisting of a raw material supplier and a coproduction manufacturer, and investigate how their interactions affect the economic and environmental performance of coproduction. We find that manufacturers should consider adopting coproduction technology when the size of the green consumer segment is either relatively small or significantly large. Specifically, if applicable, the manufacturer will endogenously set the coproduct quality at a moderate level, maximising material utilisation. This result offers novel insights into the choice of coproduction technology within a supply chain, particularly considering that a significant motivation for manufacturers to embrace coproduction is to capture value from green consumption. Additionally, when the size of the green consumer segment is sufficiently large, the supplier can benefit from coproduction by raising the wholesale price for raw materials, creating a win-win outcome for both the supplier and the manufacturer. However, we also find that coproduction technology is not always beneficial to the environment. The manufacturer may produce large quantities of coproducts due to high demand from green consumers, leading to increased total material consumption and waste generation.
Published Version
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