Downstream supply chain management refers to coordinating the flow of information and goods with clients and customers. It contrasts upstream SCM, which involves coordinating buying activities with suppliers.
Holistic Chain Perspective
In a traditional supply chain, manufacturers buy materials or components and make goods. They sell finish goods to wholesalers, which in turn sell them to retailers. Retailers hold inventory and sell goods to consumers. From a conventional channel structure, downstream activities are those carried out by wholesalers and retailers. They are responsible for delivering goods to the end customer and client. All channel members benefit, however, when consumers get the best value at the retail level.
From a single-business perspective, downstream activities refer to those more immediate to the company. A raw materials or components supplier conducts downstream activities when selling and providing inventory to a manufacturer. The manufacturer then produces goods and performs downstream activities by selling and delivering them to a wholesaler. The wholesaler's downstream includes selling and transporting goods to a retail distribution center or directly to stores. Finally, the retailer's downstream involves selling to consumers.
Supply Chain Management Advantages
When all channel members view the consumer as the most important customer, they collaborate on downstream activities rather than only valuing independent business roles. By taking this collaborative approach, they share the objective of delivering the best quality item at the most affordable price to the marketplace. Channel members share in responsibilities of sourcing quality materials, arranging for low-cost logistics and transportation and garnering marketplace demand. Manufacturers, wholesalers and retailers may cooperate in the major downstream activity of promoting finished goods to consumers. When consumers want a particular brand or product, all channel members benefit.
Other Common Downstream Activities
Inventory management is a common downstream activity. It is the wholesaler's responsibility, for instance, to ensure it maintains adequate inventory levels to replenish supplies of retail buyers. Retail buyers also need to maintain adequate inventory levels to meet consumer demand. Logistics, transportation, marketing and sales are primary downstream activities engaged in by many channel members. Billing and payment systems used with buyers are part of downstream SCM.
Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.