Upstream vs. Downstream Supply Chain
The supply chain is often divided into two parts: upstream and downstream. Upstream supply chain is the process of getting materials to the manufacturer, while downstream supply chain is the process of getting products from the manufacturer to the end consumer.
While these two halves of the supply chain work very differently, they do affect each other. Your upstream supply chain will determine the amount of supply available, while downstream supply chain is indicative of the demand.
At Unilog, we help our clients manage both the upstream and downstream supply chain to keep the entire process working in harmony. As a 4PL provider, we provide comprehensive supply chain solutions that are built to fit our clients’ needs. In this article, we’ll take a look at the difference between upstream and downstream supply chain and how to manage these two key components.
What is the upstream supply chain?
Upstream supply chain is where products are created. It starts with raw material sourcing – where do your materials come from? From there, the raw materials go to your suppliers, who create components or ingredients that will later be used in your final product. Finally, these components move to your manufacturer, who creates the products that will be sent to consumers.
Organizations should be proactive when managing their upstream supply chain to avoid product shortages. One way to do this is to avoid relying entirely on one supplier. Instead, look for ways to diversify your supply chain. In particular, it’s important to look for suppliers in different geographical areas. This minimizes the effect of natural disasters and other location-specific problems.
What is downstream supply chain?
Downstream supply chain is the process of sending your products from production to the end consumer. Inventory management and warehousing are part of the downstream supply chain. You’ll need to determine where and how your products will be stored before they are shipped out.
The downstream supply chain also includes the delivery process. How do products get from warehouses to the end consumer? Which delivery carriers do you work with, and how are your products transported? Do you track your shipments during this process? Are your products sold online or in a brick-and-mortar retail store? Downstream supply chain also includes your returns policies. Can customers return your products and if so, how does this process happen?
The downstream supply chain is reliant on the upstream supply chain. Without raw materials and manufacturers, you won’t have products available to meet demand. Conversely, demand from the downstream supply chain affects how the upstream supply chain operates.
Consumer trends have a significant effect on the downstream supply chain. For example, many consumers today prefer to shop online and have products delivered directly to them. Suppliers have had to adjust their strategies, moving away from brick-and-mortar stores and towards direct delivery.
Supply Chain Flows
There are three things that flow through the entire supply chain: materials, money, and information. While these flows move in different directions, they are all reliant on each other. In order to keep your supply chain working properly, you’ll need to balance all three components equally.
Flow of Materials
Materials flow in both directions – from upstream to downstream and vice versa. Materials flow from the supplier to distributors and customers, and then back up the supply chain if the customer returns a product. If materials aren’t available, the entire supply chain will grind to a halt.
There are many different factors that can affect material flow throughout the supply chain. Availability of materials can fluctuate as physical environments change and resources are depleted. Labor shortages can also affect material flow, as workers need to be available to process and ship materials. Sociopolitical tensions can also affect the availability of certain materials.
Additionally, some materials need to be stored and shipped in specific conditions. For example, at Unilog, we’ve worked with companies in the biomedical sector who ship temperature-sensitive items. If materials can’t be shipped safely and in a timely manner, it affects the overall flow of the supply chain.
Flow of Money
The flow of money in the supply chain is the opposite of the flow of materials. While materials move from upstream to downstream, money flows in the opposite direction. End customers pay organizations for their products. Organizations then pay their distributors and suppliers for their services and supplies.
Economic trends affect the flow of money throughout the supply chain. During times of economic downturn, customers are more discerning with their money, resulting in reduced demand. When this happens, suppliers, manufacturers, and warehouses need to adjust their operations to avoid losing money.
Flow of Information
The final supply chain flow to keep in mind is the flow of information. Information flows both ways through the supply chain, and it is crucial to the success of any business. Individual parts of the supply chain cannot work on their own – they need to communicate with each other in order to work successfully.
Communication and transparency can help suppliers, distributors, and retailers avoid confusion and prevent late or missed deliveries. Open communication throughout the supply chain not only makes everyone’s jobs easier, but it also keeps customers happier with accurate deliveries.
Managing Upstream and Downstream Supply Chain
There are many different approaches to supply chain management. Many large organizations are vertically integrated, which means they manage both the upstream and downstream of the supply chain themselves. Alternatively, you might have one company managing the upstream supply chain, while another company manages the downstream supply chain. It’s also possible to have several companies involved.
Working with a 4PL logistics provider is often the easiest way to manage your supply chain all in one place. At Unilog, we use advanced technology to manage the entire supply chain. We help clients find the appropriate suppliers, warehouses, and shipping partners. Our Logivice tracking system gives clients the ability to track items throughout the entire supply chain.
If you’re struggling to manage your supply chain, you don’t have to handle things on your own. Contact Unilog today to learn more about our supply chain solutions.