UPSTREAM & DOWNSTREAM REQUIREMENTS

‘Upstream’ and ‘downstream’ are business terms applicable to the production processes that exist within several industries. Upstream, downstream and midstream make up the stages of the production process for different industries.

Upstream: The upstream stage of the production process involves searching for and extracting raw materials—it does not do anything with the material itself, such as processing the materials. In upstream, firms simply find and extract the raw material. Thus, any industry that relies on the extraction of raw materials commonly has an upstream stage in its production process. In a more general sense, upstream can also refer to any part of the production process relating to the extraction stages.

Downstream: The downstream stage in the production process involves processing the materials collected during the upstream stage into a finished product. It further includes the actual sale. End users will vary depending on the finished product. Regardless of the industry involved, the downstream process has direct contact with customers through the finished product.

Midstream: Several points in between the two points (the place where raw is extracted and till it reaches the final consumer as finished product) are taken as the midstream. It depends on the reference point as how many or which stage is considered as the midstream by an industry.

Whether an activity is upstream or downstream depends on the point of analysis in a supply chain. A manufacturer considers suppliers as upstream and customers as downstream. Within a manufacturer, control over activities in the supply chain is subject to a company’s management. Even so, a manufacturing activity that occurs prior to another is considered an upstream activity. Control over activities outside the company is subject to inter- company negotiations, cooperation and technology. The firms involved in the chain of upstream and downstream processes keep their eyes on several other dimensions, such as strategies, integration and improvement.

(i) It is important to understand the strategies of supply chain partners. A supplier may have a strategy to grow and begin to perform manufacturing functions infringing on other supply chain member’s markets. Understanding the incentives of suppliers, as well as customers, helps to plan for these types of changes. In order to remain a powerful player in a supply chain, a company can no longer afford to focus on its own business or those of its competitors, it must understand supply chain members business as if they were their own.

(ii) Integration of business processes throughout a supply chain depends on

cooperation of members. For example, a manufacturer who decides to sole-source a component with one supplier can control and integrate with the supplier to streamline business processes. Technology can be implemented to make business processes between companies easier to perform. For example, a supplier can change from requiring a purchase order for every delivery to having an open purchase order that simply keeps track of shipments based on material requirements plans from the manufacturing resource planning software of a manufacturer. This type of integration becomes less likely when suppliers serve many manufacturers.

(iii) Manufacturers in a supply chain make ‘make-or-buy’ decisions that affect the chain. They do this based on cost and scheduling improvements available. Manufacturers may also begin using distributors to capture additional markets or decide to concentrate on larger customers whom they can serve directly. All of these types of potential improvements depend on understanding the motivations and incentives of the companies in a supply chain.

Industries, to have a smooth and uniterrupted fuctioning, depend heavily on the upstream and downstream requirements. In the case of India , we find several bottlenecks in both the processes:

(i) In the case of the private sector, the downstream process seems better. But it is not so. Upto the level of ‘wholesale’ it is somewhat organised, but the retail trading is quite fragmented. India’s retail business remains least organised. Organised retail is yet to evolve in the country, thus, the levels of uncertainities, potential of market access, monitoring and regulation of retail market are too weak.

(ii) Upstream processes are also not up-to-the-mark. From the stage where the wholesale comes into picture, things look better. But outsourcing the raw from the local producers is an uphill task in the country. Due to this the upstream segment of the economy has remained too weak and frgamented.

(iii) The industrial and manufactured sectors have been managing their upstream and downstream requirements, but their heavy depenence on the unorganised sector is a challenging issue in front of India.

(iv) In the case of agricultural products, the situation is even worse. Agrimarkets of regulations by the APMCs did not allowed India to establish a common and single market. This has hampered not only the growth and business prospects, but it has also crippled the agricultural sector in a very serious way. It has taken the heaviest toll on the agriculture sector which still remains a non-remunerative profession.

(v) As India is to compete in the global market, it immediately needs to stregthen it upstream and downstream process. For this, India is advised to pick the best practices from around the world and integrate itself with the developed world with the better ways and the state-of-the-art tools and means.