The parameter k denotes the mass flow multiplier from the inflow to the outflow. Thus, when k < 1, incoming goods are packed together to form larger units, whereas, when k > 1, incoming goods are unpacked to from smaller units.
The product of incoming enthalpy times mass flow equals the product of outgoing enthalpy times mass flow except for dissipative losses (inefficiency of the production). The specific enthalpy of dissipation is measured relative to the outgoing (product) flow.