The concept of “Upstream and Downstream” in procurement | The Procurement Life

Welcome to The Procurement Life channel! Today, we're exploring “Upstream and Downstream” concept in procurement.
In procurement, the concepts of “Upstream” and “Downstream” refer to different stages and activities in the supply chain, focusing on how goods and materials flow from the initial suppliers to the end customers.
These term help in categorizing procurement processes, supplier relationships, and supplier chain strategies.
Upstream Procurement
Upstream in procurement refers to the activities involved in the acquisition of raw materials and other inputs required for production or service delivery. This side of procurement focuses on:
• Supplier Identification and Selection
• Strategic Sourcing
• Supplier Relationship Management (SRM)
• Market Analysis
• Sourcing Strategy Development
• Contract Management
Upstream activities are strategic in nature, focusing on building a strong foundation for the organization’s supply chain by ensuring a stable and efficient flow of row materials and inputs.
Downstream Procurement
Downstream Procurement, on the other hand, involves, the processes related to the distribution and delivery of finished products to customers. This includes:
• Demand Planning and Forecasting
• Order Fulfilment and Distribution
• Customer Relationship Management (CRM)
• After-Sales Support
• Sales and Marketing Strategies
Downstream activities are focused on the customer side of the supply chain, aiming to efficiently distribute product and maximize customer satisfaction and sales.
Let's understand these concepts using operations carried out in a car manufacturing organization, which involve various processes and tasks that need to be delivered on time.
Upstream Procurement Process: (Pre-Production):
• Selecting suppliers for car components based on quality, cost, and reliability.
• Negotiating contracts for pricing, delivery schedules, and quality standards.
• Managing supplier relationships, supply chain, and new product development.
Downstream Procurement Process: (Production and Post-Production):
• Procuring materials for production, ensuring quality control, and managing inventory.
• Coordinating distribution and logistics for finished vehicles.
• Procuring after-sales parts, services, and managing warranty claims.
These procurement processes are crucial for efficient car manufacturing, from sourcing materials to delivering vehicles to customers and providing after-sales support.
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