What is downstream supply chain management?

Written by stephen byron cooper Google
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What is downstream supply chain management?
A company's products travel downstream. (George Doyle/Stockbyte/Getty Images)

Supply chain management (SCM) is a broad discipline practised by business, particularly manufacturers, to deliver goods and/or services to their customers. The supply chain travels from the business’s suppliers, through the organisation up to delivery of goods to customers. The business is a supplier to its customers, and so also part of a supply chain. The tasks of SCM that occur once the goods or services have been prepared are called “downstream activities.”

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Supply chain management

Supply chain management has so many responsibilities that it is never a department in itself within organisations. It involves purchasing, warehouse management, production scheduling, process flow monitoring, industrial relations, production management, quality control and manufacturing engineering, before any “downstream” activities are considered. The concept is more a business strategy and if it is implemented by a specific department, that section of the business is more likely to act in an advisory capacity than as a management structure.

Downstream

To understand the concept of “downstream” functions, think of the supply chain as a river, passing by the company’s location. Water between the company and the source of the river is “upstream.” Water between the company and the mouth of the river is “downstream.” Therefore, events that happen in the chain of supply before the company are “upstream” tasks; these include all the processing of supplies that arrive at the company as raw materials. Downstream activities occur once the river has flowed past the company on the way to the sea.

Downstream entities

The obvious entities that lie downstream of a company are its customers. However, as the supply chain flows on past customers of customers, and their customers, the immediate customers of a company’s products are not the only people with whom the company should be concerned. A company hoping to increase sales may need to enter into alliances with its immediate customers in order to deliver a more attractive offering to customers further downstream.

Downstream functions

The downstream activities within the company involve those departments that deal with clients, including marketing and shipping. However, client-facing departments do not turn their backs on their own colleagues. The marketing department gets involved in product development, which may include assisting in the selection of source materials -- an upstream function. The shipping department may involve itself in the production line to influence lot sizes and packaging, enabling them to optimise deliveries and cut costs.

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