There are two distinct types of customers- external and internal. An external customer may be the one who uses the end product or service, the one who purchases the end product or service, or the one who influences the sale of the end product or service. An external customer exists outside the organization.
 
An internal customer is also important. Every function within an organization, whether it is engineering, order processing, or production has an internal customer. That means each function receives a product or service from another function and, in exchange, provides a product or service to a subsequent function. From process perspective, every process is considered a customer of the preceding process. Grinding process can be internal customer to boring process.

A diagrammatic representation is provided below (Figure 1-1) to show internal and external customer in the supply network perspective.