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Upstream vs. Downstream in Supply Chain Management

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Upstream vs. Downstream in Supply Chain Management

Supply chains are an essential part of every business. Managing your supply chain well is essential, especially if you want to maintain good relationships with your customers and suppliers. It’s also an essential part of growing a business.

We’ve all experienced the frustrations of supply chain delays and failures. 

Supply chain management is complex, and there are many steps in the process, but it can be broken down into two big activities: Upstream and Downstream.

Understanding each of these will help you understand your company’s supply chain and manage it properly.

A quick overview of the entire supply chain

There are 5 key aspects of the supply chain management process:

  1. Planning
  2. Sourcing
  3. Manufacturing
  4. Delivery
  5. Returns

This process is fairly self-explanatory. You begin with the overall plan of your supply chain. Source the raw materials needed to make your products. Manufacture your products. Deliver them to your customers. And handle any customer returns. 

Of course, when you list it out like that, each of those steps sounds simpler than it is in reality. At each step there are many different moving parts. And you can experience various problems and delays at every step.

To understand this better, you can split the supply chain into two parts.

Read: Tips to build a robust supply chain

What is the upstream supply chain?

The upstream supply chain is the sourcing and manufacturing of products. Most businesses refer to this as their suppliers. These are the businesses that you order the raw materials from, and the businesses that manufacture the products. 

Essentially, the upstream supply chain is the activities happening before you handle your products. 

Managing your upstream supply chain means communicating with suppliers and manufacturers, placing orders so you can fulfill your customer’s orders on time, and paying the suppliers and manufacturers.

The majority of supply chain delays happen upstream, so you want to keep a close eye on these activities.

What is the downstream supply chain?

The downstream activity is what happens after you have your products. Delivery and returns are the two downstream activities. 

As you can see, your business is usually in the middle of the stream. And your customers are downstream. The primary purpose of downstream is to deliver the products to the customer. And be available in the case of returns. 

This part of the supply chain is the most visible to your customers. They don’t typically see what’s happening with your suppliers or manufacturers, they only see you delivering the product to them. 

Downstream also deals with accepting payments from your customers. As you can see, money flows upstream. Moving from your customers, to you, to your suppliers and manufacturers.

Upstream Downstream Supply Chain

Spex has served as a local manufacturer since 1946. If you want to learn more about how we can help optimize your supply chain, and provide a range of manufacturing service, reach out to one of our team members.

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