Difference between upstream and downstream operations

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Upstream operations: Activities performed by suppliers

Upstream operations are those operations that occur before your firm (or early in the sully chain). For example, upstream activities include activities performed by your suppliers, or the raw materials used by your company.

Downstream operations: Activities closer to your customers

While upstream operations are those that occur before your firm, downstream activities are those that happen after your firm. This may include using your product or service as part of another firm’s input, or retailing of your product.

The river metaphor

A good way of remembering the meaning of upstream and downstream is recognizing the river metaphor that the terms are based on. Upstream activities are those that occur before your firm. Downstream activities are those that occur after where your firm is.

The connection with backward and forwards vertical integration

The terms upstream and downstream connect directly to the terms backward integration and forward integration. Backward integration refers to going backward, or upstream, integration activities that are traditionally performed by firms earlier in the supply chain. Forward vertical integration refers to going forward, or downstream, integrating activities traditionally performed by companies closer to your customers.

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