Supply chain knowledge is the key to success for any business. Once supply lines are disrupted, it can cost your company an incredible amount of money. When determining upstream vs downstream, it is all about the company’s location. Prioritizing upstream and downstream elements makes you fully responsible for the production process. Based on your current handling of the company resources, this can be as difficult or as simple as you need.
An upstream operation focuses on mining and drilling resources. They also play a key role in identifying places that have the most abundant materials. As the beginning point, an upstream company directly influences the workload of the downstream process. Once they pinpoint where the materials are located, an upstream company has to deal with the extraction process. This can be time consuming, and may end up in brief stoppages based on the location.
Project management is a necessary skill for any upstream company due to possible stoppages. In a situation where the extraction process is time sensitive, plans are put in place to optimize extraction to meet the time goal – some of these plans are location specific, with law and paperwork hurdles standing in the way.
A company that is in the downstream role makes sure that the materials from the upstream process are delivered. As a production company, they deliver to other companies, distributors or directly to clients. They have a key role in ensuring that the materials collected go into a finished product or service.
In the upstream example above, a time sensitive project leads to a different focus for the materials. Some of those time restrictions can come from a client that needs a finished product by a specific date. So, if the upstream fails to provide the materials in a timely manner, the downstream process absorbs the impact from that mistake. This is a good visual of how upstream and downstream rely on one another to create a timely delivery.
Why It Matters
Some companies have decided to control the entire production of materials, from extraction to delivery. This is a big deal since the upstream and downstream process integrate so well together. By taking this route, a single company can get the materials they need, deliver them to the appropriate locations and then sell the final product.
It’s officially known as vertical integration, a highly efficient way to keep projects inhouse and cut third party costs. Not all companies will have the resources to handle this three-stage process. Many of the big brands of the world have already made financial decisions based on the location of materials. Small and midsized companies don’t have this option, but may have a better alternative if they’re locally owned. Before a company commits to any type of vision, their upstream and downstream process should be a solid part of the business plan.
A supply chain needs to have production values that make sense. Both upstream and downstream process play an important role in a well-run business. Keep an eye on both, and you’ll always be in a position to deliver your best.