ri lt re and ood ana ement 8.29
strengthened at the earliest. The Government of chain. A manufacturer considers suppliers as
India decided to merge the commodity market upstream and customers as downstream. Within a
regulator, the Forward Market Commission manufacturer, control over activities in the supply
(FMC) with the Security & Exchange Board of chain is subject to a company’s management. Even
India (SEBI) in 2015–16 with enhanced and so, a manufacturing activity that occurs prior to
effective regulatory power given to it. another is considered an upstream activity. Control
over activities outside the company is subject to
uPstreAm & downstreAm inter-company negotiations, cooperation and
requIrements technology. The firms involved in the chain of
upstream and downstream processes keep their
‘Upstream’ and ‘downstream’ are business terms eyes on several other dimensions, such as strategies,
applicable to the production processes that exist integration and improvement.
within several industries. Upstream, downstream (i) It is important to understand the strategies
and midstream make up the stages of the of supply chain partners. A supplier
production process for different industries. may have a strategy to grow and begin
Upstream: The upstream stage of the production to perform manufacturing functions
process involves searching for and extracting infringing on other supply chain member’s
raw materials—it does not do anything with the markets. Understanding the incentives of
material itself, such as processing the materials. suppliers, as well as customers, helps to
In upstream, firms simply find and extract the plan for these types of changes. In order
raw material. Thus, any industry that relies on to remain a powerful player in a supply
the extraction of raw materials commonly has chain, a company can no longer afford to
an upstream stage in its production process. In focus on its own business or those of its
a more general sense, upstream can also refer to competitors, it must understand supply
any part of the production process relating to the chain members business as if they were
extraction stages. their own.
Downstream: The downstream stage in the (ii) Integration of business processes
production process involves processing the throughout a supply chain depends on
materials collected during the upstream stage into cooperation of members. For example,
a finished product. It further includes the actual a manufacturer who decides to sole-
source a component with one supplier
sale. End users will vary depending on the finished
can control and integrate with the
product. Regardless of the industry involved,
supplier to streamline business processes.
the downstream process has direct contact with
Technology can be implemented to make
customers through the finished product.
business processes between companies
Midstream: Several points in between the two easier to perform. For example, a supplier
points (the place where raw is extracted and till can change from requiring a purchase
it reaches the final consumer as finished product) order for every delivery to having an open
are taken as the midstream. It depends on the purchase order that simply keeps track of
reference point as how many or which stage is shipments based on material requirements
considered as the midstream by an industry. plans from the manufacturing resource
Whether an activity is upstream or downstream planning software of a manufacturer.
depends on the point of analysis in a supply This type of integration becomes less