The supply chain is an integral part of the eCommerce market. The supply chain is what underlies the eCommerce sector. The demand and supply of products are what keep the eCommerce segment going. The supply chain is divided into two parts; one is the upstream supply chain and the other is the downstream supply chain. The two sides of the supply chain together make the whole setup for the mobilization of products. The upstream supply chain is the one that supplies the products to the manufacturer from the suppliers. The downstream value chain is the arrangement that takes products from the manufacturer to the users in the market.
While these two halves of the supply chain work very differently, they are linked with each other and are very important for the functioning of the entire market. If any of the two halves of the supply chain are broken down, the market will be gravely affected. The upstream supply chain determines how many supplies are available to the manufacturer for completing the manufacturing process.
On the other hand, the downstream supply chain gets products from the manufacturer to the end users, who buy the finished products from the market. The upstream, downstream supply chain keeps the market working over a long period. The disruption of this organized market supply chain is essential to all the market stakeholders.
What Is Upstream Supply Chain?
The upstream supply chain is the combination of processes and movements that support the manufacturing of products and their sourcing out from suppliers. Usually, the upstream supply chain works by sourcing raw materials from the suppliers and sending them to the manufacturing unit so that the manufacturer can create the final product. Sometimes, the different components of a product are made at various points and then sent to the manufacturer for assembling into the final product. The final product is sent to the consumers, but it is done through the downstream supply chain.
All organizations in the manufacturing sector depend on the upstream supply chain as they need raw materials for the creation process. Organizations should proactively organize and branch out the upstream supply chain so that they do not entirely depend on one supplier to manufacture the products. By branching out the upstream supply chain, you can get all the supplies from the raw materials in a fast-paced manner. Since the goal for any business organization is to spread its business and operate over different geographical locations, it makes sense to create a complete network of suppliers from multiple locations so that you could also spread out and optimize the downstream supply chain when needed. If your business is concentrated in one place, you will be more prone to losses if there are location-specific problems.
What Is the Downstream Supply Chain?
The downstream supply chain streamlines the supply of finished products to the customers. The downstream supply chain supplies the end product from the manufacturer to the end-user segment of the market. Managing the end products for the supply of the products to loyal consumers. Inventory management and warehousing play an essential role in the downstream supply chain. Inventory management helps manage the finished product stock so that products are sent out to the market when there is a demand.
Proper inventory management ensures that the product demand is always met through fluctuating market conditions. Proper inventory management is done with good warehousing of products. Established eCommerce companies have a warehouse or rented warehouse space for storing products before sending them out for order fulfillment. Since the demand for finished products from manufacturing through the eCommerce supply chain is high, companies are paying attention to inventory management and warehousing. Renting warehouses and establishing new warehouses is a practice that many eCommerce companies are taking up.
However, the downstream supply chain not only contains the warehousing practice or inventory management but also includes the order fulfillment and delivery process. Hence, the downstream supply chain affects the final feedback and response from the end consumer. The downstream supply chain should be optimized at multiple points for consistently good quality customer experience. The downstream supply chain involves customers at the end, so the manufacturer has to take care of many details while laying down the supply chain. Warehousing is only the beginning of the downstream supply chain, as the companies must also decide how the products reach the customers from the warehouse.
The company must also decide on the delivery partner to complete the order fulfillment process faster. The order fulfillment process should also be so that the product reaches the customer in a very conserved and protected manner. The shipment should be protected during transit and get the person how he expects.
The packaging and delivery mode is decided depending on the product the manufacturer deals with. For example, perishable goods have to be delivered at a much faster pace than other products, and they have to be mobilized in cold storage setups.
The downstream supply chain also includes the different points of transit. For example, it also makes a difference if the products are sold through a brick-mortar store or an online store mode. The downstream supply chain may be the arrangement the customer is most worried about. However, the proper functioning of the downstream supply chain depends on the upstream supply chain. If the upstream supply chain fails to supply the suitable manufacturing raw material at the right time, there will be no finished product to send into the downstream supply chain. Moreover, the upstream supply chain also decides the quality of the final finished product.
Therefore, both halves of the supply chain are significant for the business and the customer. For example, the volume of demand from the downstream supply chain also decides how the upstream supply chain functions. Consumer trends and other factors affect the downstream and upstream supply chains. How the consumers wish the products delivered also affects how the manufacturer and the supplier act and manage the process.
Related: What is Supply Chain Continuity?
How To Manage The Supply Chain And Its Components
There is the flow of different components through the different types of supply chains. The business must manage upstream and downstream supply chains for proper supply chain management. The company must work on the three components to manage the supply chain. The three other components of the supply chain are as follows-
Flow Of Materials
There is a flow of materials from suppliers to manufacturers and the completed products from the manufacturer to the customers. Materials flow in both directions, the downstream direction and the upstream direction. Materials flow from the distributors to the manufacturers and then to the customers and back from the downstream supply chain when there are returns from the customers. If materials, primarily raw materials, are not available, then the whole supply chain can stop functioning.
You have to manage multiple factors to smooth materials flow through the chain. For example, the larger-scale resource availability affects the availability of materials in a given environment. Suppose the resources in an environment are depleted, and the supplier needs more material than the manufacturer requires. In that case, it can lead to a scarcity of materials and disruption of the upstream supply chain. Labor shortages can also affect the flow of material.
So, the supplier and the business should ensure enough labor and workers to carry the materials forward and mobilize them between two endpoints. Workers are needed to process and ship the materials, and this is only possible when the supplier and the business hire enough workers that help with the shipping and transport of raw materials from one place to the other. Moreover, some materials must be stored under specific conditions and properly arranged. Just like finished products, the accurate logistics of the raw materials are equally important.
Flow Of Money
All the operations of a business are dependent on the flow of money. The finances of a company are also managed through a chain. The finances cycle through different parts of the supply chain. The customer spends cash and gives it to the business in return for the products they get. On the other hand, the business's money is put back into the supply chain to source raw materials. The supplier thus earns money through the supply chain. There is also the return of funds from different points if the quality of the material needs to be better.
The trends of the economy affect the flow of money through different parts of the supply chain. If the economy is down, the buyers will not buy enough products, and the demand will go down; the money made through these processes also goes down further. If you see the upstream vs. downstream supply chain, there is a money-backflow from the stakeholders, like the customer gives money to the supplier through the downstream supply chain and goes against the grain.
Proper upstream management can increase the money flow through the downstream channel of the industrial supply chain. To predict the money-making trends through the supply chain, businesses and suppliers must look at the demand they get from customers and decide to increase or decrease supply and manufacturing pace. It is essential to optimize the flow of material to control the flow of money so that the business does not make a loss.
Flow Of Information
In the era of data and information, the management of information flow and proper communication is an essential factor in the functioning of the eCommerce supply chain. The eCommerce supply chain differs from the brick-mortar one because it is more dispersed than the brick-mortar stores. There need to be multiple information checkpoints in the supply chain which help in the smooth flow of data and information through the supply chain. Information like the amount of resources and materials that the supplier is sending, the price of the supplies, and the location of these supplies also makes a lot of difference.
The supply chain also includes information flow related to order delivery and fulfillment. The supply chain stakeholders need to communicate transparently so there are no logistics issues. The flow of information also includes the real-time location of the order and the expected delivery date of the shipment so that the customer knows when to receive it.
When the customer is kept in the loop of information about the order and delivery, the customer experience is improved. Communication and transparency in the information channels between the supplier, merchants, and manufacturers can reduce confusion and miscommunication between different process stakeholders so that the operations go smoothly.
Management Of The Supply Chain
Supply chain management has different approaches, but the most crucial point is to plan and think ahead to manage the logistics part well. From warehousing to inventory, order fulfillment to sourcing of materials, many aspects must be managed well. Your management team needs to predict and analyze the market demand so that raw materials are sourced accordingly, and finished products are created in enough volume to meet the demand.
logistics planning is also essential in the eCommerce sector because most of the products will always be in transit to reach a customer. The on-the-road planning and real-time sourcing of information are also essential for your delivery executives.
Upstream and downstream supply chains are integral parts of a modern business. They must be managed and optimized with a forward-looking attitude, considering customer needs and market trends. Companies must strive to keep inventory prices low, maintain accurate stock counts, and control costs. In addition, customers' experience of their products or services should remain a top priority. Properly managing an upstream and downstream supply chain is essential for businesses to be successful in today's digitized economy. Are you ready to take your business's upstream and downstream goals to the next level? Digitalize your operations by working with Simpl, who can help you streamline complex processes, drive customer satisfaction, improve profitability, and make your business stand out. Need help to fulfill eCommerce orders? Get in touch with Simpl today!