Upstream vs. Downstream Supply Chain: The Similarities and Differences

The supply chain consists of all the steps involved in getting a product to the end consumer. Typically, it begins with the suppliers and vendors that provide raw materials. The next part of the supply chain is manufacturing, and the final step is distribution. Distribution can involve multiple intermediaries, including wholesalers, retailers, distributors, and even the internet.
Different stages within the supply chain are usually referred to as upstream and downstream. Upstream supply chain refers to operations in which the materials flow into the organization and downstream supply chain involves operations in which materials, typically in the form of finished products, flow from the company to the customers.
In this article, we explore the similarities and differences between upstream vs. downstream supply chain.
Before we explore the differences between upstream vs. downstream supply chain, it’s vital to understand what the supply chain in general includes.
A supply chain is a network of processes and businesses that contribute to the creation, distribution, and sale of a product. It starts with suppliers and vendors who provide raw materials for the product manufacture. Manufacturers procure those materials and convert them into products. Then, a distributor transports the product from the manufacturer to the consumer.
Supply chain management supervises this process through five steps:
Great supply chain management help ensure consumers receive the products on time and at their quality expectations. Besides that, supply chain management help businesses reduce operating and procurement expenses, optimizing profitability.
The upstream supply chain refers to all activities related to the company’s suppliers. In other words, it covers parties that source raw material inputs to send to the manufacturer. On the other hand, the downstream supply chain includes all post-manufacturing activities related to the distribution of products to end consumers.
The upstream supply chain can also be thought of as the “supply”, while the downstream supply chain is the “demand”.
Supply chain management strives to achieve the balance between demand and supply to ensure there are no inventory shortages, lost sales, and over-ordering.
As we mentioned, the upstream supply chain refers to all activities related to the company’s suppliers. That said, here are some of the common things the upstream supply chain includes:
The upstream supply chain deals with inventory levels, production capacity, scheduled delivery, and payment terms. Here, everything is about buying and distributing products in the warehouse, and your company is in the center.
Note that what happens in the upstream supply chain affects your entire supply chain. That said, underutilized plant capacities, parts shortages, excessive inventory, and high transportation expenses can cause your company to lose money. The same goes for late shipments and defective raw materials or parts.
Such supply chain issues can also cause the bullwhip effect, which refers to minor fluctuations in retail sales for a product that create excessive inventory for suppliers, manufacturers, and distributors. And the upstream part of the supply chain is affected most by this effect. For this reason, businesses need to consider the entire supply chain, not just the downstream part of it.
The downstream supply chain deals with activities related to distributing and getting the product to the end customer. Below are the main parts of the downstream supply chain:
That said, the downstream supply chain handles orders, repairs, service requests, and payments for orders, involving everything from delivering the product to the warehouse to selling it to the consumers.
Supply chain managers need to find a balance between demand and supply. Only this way can the supply chain run smoothly, without over-ordering or losing money because there is no inventory.
Over-ordering can be a problem because it can lead to businesses losing money by having too much stock that needs to be discounted or dumped.
Outlining upstream vs. downstream supply chains can help supply chain managers understand and deal with three main flows that occur in the supply chain:
The materials flow isn’t just a linear path of raw materials to finished products. Sometimes, downstream partners will process returns. And distributor agreements need to be set up to process those returns and customer exchanges efficiently.
The money flow also usually moves from downstream to upstream. The retailer must pay the distributor for the products received whereas the distributor needs to pay the manufacturer. Supply chain managers need to enforce strict controls and systems of record to ensure there are no payment delays and waste and that all parties are following their contractual obligations.
The information flow is vital to the overall performance of the supply chain. Upstream and downstream partners need to communicate regularly to optimize productivity and their operations throughout the supply chain. That said, transparency between upstream and downstream partners can help build strong, long-term partnerships.
Both upstream and downstream supply chains are vital parts of a supply chain in general. While the upstream part focuses on activities in which the materials flow into the organization, the downstream part focuses on operations in which materials, typically in the form of finished products, flow from the company to the customers.
By managing both parts of the supply chain efficiently, supply chain managers can ensure that the supply chain continues to run smoothly.
Note that well-managed logistics allow efficient supply chain management, and that is what we provide. With Unival Logistics, you will get end-to-end logistics solutions using cutting-edge technology. Your products will travel the best routes to arrive safely and on time to their destinations.
Moreover, we offer full-value insurance for added protection, so contact us if you need our services.
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.105 per ton-mile. Reducing truck transport and opting for the optimal rail transload facility can help increase expense savings through rail.</p> <h2>Rail Freight and Intermodal Strategy</h2> <p>Intermodal is the use of two or more freight transporting modes. When combining rail and road, trains are utilized for the long-haul chunk of the transport. Trucks are used to ship loads from the origin to the terminal and then from the terminal to the recipient, known as drayage.</p> <p><strong>Using rail freight as part of an intermodal strategy has many benefits</strong>, which you can discover below.</p> <h2>Rail Freight Is Eco-Friendly</h2> <p>Given the current state of our environment, caring for it is imperative. From an ecological point of view, rail freight is a great transport alternative compared to air, sea, and road freight. <strong>The biggest advantage of rail freight is the reduction of CO2 emissions</strong>. Compared to other transport modes, rail freight leaves the smallest carbon footprint.</p> <p>For example, air freight consumes 138 tons of CO2, and the combination of air and sea consumes approximately 76 tons of CO2. However, rail freight consumes only 5 tons of CO2 over the same distance. That’s why, now more than ever, rail freight deserves more attention.</p> <h2>Rail Transportation Is Safe and Efficient</h2> <p>Railway safety has notably improved over the past couple of decades. Now, <strong>rail transportation is one of the safest shipping options</strong>. With steady investments in railway infrastructure, routings, tracks, terminals, and border crossing stations, there’s a significant enhancement in the performance of rail freight.</p> <p>Moreover, GPS tracking in trains prevents theft and losses, protecting the goods in transit. Since carriers can locate their customers’ shipments and follow up on milestones, they can deliver information on container position and detect if something unexpected happens during the transportation.</p> <h2>Rail Freight Is Fast and Reliable</h2> <p><strong>Rail freight is a fast and reliable shipping mode</strong> with shorter lead times when compared to sea freight. Although not always possible, there are many situations when rail freight is a more optimal choice than other transport modes.</p> <p>For instance, one of the biggest challenges for companies with production in China is the long lead times to northern Europe when shipping by sea. Sea shipping from China to that part of Europe typically takes around seven weeks.</p> <p>With rail freight, the shipping times can be cut in half, significantly reducing the lead time. Shorter lead times can make it easier to predict business operations and costs, positively impacting capital binding.</p> <p>In addition, rail freight transport is a <strong>punctual mode of transport</strong>. Compared to sea and road freight which can be subjected to bad weather and congestion, not much can hinder the rail path, reducing the risk of unexpected delays.</p> <h2>Are There any Drawbacks of Rail Transportation?</h2> <p>Intermodal containers experience a lot of movement during transit that can damage their contents. There’s a risk of a denied claim if cargo isn't appropriately blocked and braced by rail standards.</p> <h2>Rail Freight Shipping Can Be Your Optimal Choice</h2> <p>Rail shipping has many benefits and very few drawbacks. Apart from being extremely reliable, rail freight is also cost-effective. On top of that, it leaves the smallest carbon footprint compared to other shipping modes.</p> <p>With rising challenges in sustaining our environment, it’s vital to do everything we can to reduce CO2 emissions and reduce the impact of global warming. For those reasons, using rail freight as a part of intermodal strategy can be an optimal choice for many companies that wish to see improvement in our environment.</p> <p><a href="https://unival-logistics.com/">Unival Logistics</a> provides end-to-end logistic solutions and we always choose optimal routes, so that your packages arrive on time and cause the least amount of pollution. You can also take out <a href="https://unival-logistics.com/package-insurance">full-value insurance for high-value goods</a>, track your packages in real-time, and integrate your business with Unival’s API.</p> <p>If you need a logistics partner that combines traditionally effective methods of transport with modern solutions, contact Unival Logistics.</p> <script type="application/ld+json"> { "@context": "https://schema.org", "@type": "BlogPosting", "mainEntityOfPage": { "@type": "WebPage", "@id": "https://unival-logistics.com/rail-freight" }, "headline": "What You Need to Know About Rail Freight", "description": "Rail freight is reliable, fast, and green and can be an excellent choice for various businesses. 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