Upstream Supply Chain: How Upstream and Downstream Differ

A supply chain is the connected network of raw materials, processes, and information systems required to make and deliver a finished product (like a computer) or a service (like healthcare). A well-organized supply chain can optimize production lifecycles and reduce costs for businesses.

The upstream supply chain is the flow of materials necessary to expedite a production process.

Upstream processes include outsourcing raw materials—such as plastics, woods, metals, and other more specific and intricate products—and production operating costs to create goods promptly. Raw materials are essential to the global supply chain, and a shortage can lead to lower inventory levels and wider market fluctuations. Finding affordable raw materials can give providers a competitive advantage.

Companies that focus on the upstream supply chain can ensure the finished products' quality, track inventory levels, minimize shortages of raw materials, and improve end-customer satisfaction.

Upstream and downstream refer to different parts of a supply chain. Upstream describes the procurement and molding of raw materials inputs and the supply base. The entire supply chain relies on the upstream steps, whose demand forecasting will predict the availability and level of need for certain raw materials. The processes in downstream supply chains are generally post-manufacturing and involve the distribution of products to retail stores or online as part of e-commerce and sales to end customers. The flow of information in a downstream supply chain ends with the final consumer.

A vertically integrated company oversees the upstream and downstream supply chain processes, or one company may handle the downstream process while another manages upstream work and partnerships with wholesalers. Your supply chain can be the most efficient and cost-effective with transparent sourcing of the product’s parts followed by quality production and ending with the seller’s use of targeted marketing for the final product.

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