Organizations conduct business by taking in raw materials from their suppliers and converting those inputs into products or services which they then deliver to their customers. The collection of the organization and its external suppliers and customers is called the supply chain. The supply chain in the following diagram is represented by the horizontal flow from external supplier on the left to the external customer on the right.
Another useful definition to make, however, is that of internal suppliers and customers. These suppliers and customers exist within the organization. Suppose you are the manager for process B in a company. The materials you receive as inputs to your process come from process A: your internal supplier. The products that you manufacture are then delivered to process C downstream: your internal customer. Note that even though processes A, B, and C are all within the same company, the principle of "exceeding the needs and expectations of your customer" can be well applied between the processes of an organization. Quality should be achieved as a snowball effect, building gradually from one process to the next. This flow is represented in the diagram as the vertical path from top to bottom.