We show how to treat supply networks as physical transport problems governed by balance equations and equations for the adaptation of production speeds. Although the non-linear behaviour is different, the linearized set of coupled differential equations is formally related to those of mechanical or electrical oscillator networks. Supply networks possess interesting new features due to their complex topology and directed links. We derive analytical conditions for absolute and convective instabilities. The empirically observed "bull-whip effect" in supply chains is explained as a form of convective instability based on resonance effects. Moreover, it is generalized to arbitrary supply networks. Their related eigenvalues are usually complex, depending on the network structure (even without loops). Therefore, their generic behavior is characterized by oscillations. We also show that regular distribution networks possess two negative eigenvalues only, but perturbations generate a spectrum of complex eigenvalues.PACS numbers: 89.65. Gh,89.75.Hc,84.30.Bv Econophysics has stimulated a lot of interesting research on problems in finance and economic systems [1], applying methods from statistical physics and the theory of complex systems. Recently, the dynamics of supply networks [2, 3, 4], i.e. the flow of materials through networks, has been identified as an interesting physical transport problem [3,4,5], which is also reflected by the notion of "factory physics" [6]. Potential applications reach from production networks to business cycles, from metabolic networks to food webs, up to logistic problems in disaster management. Empirical and theoretical studies have shown that the flow of goods between different producers or suppliers can be described analogously to driven many-particle flows between sources and sinks (depots), where the particles represent materials, goods, or other resources. In contrast to the stationary behavior assumed by most production engineers, this flow may display a complex dynamics in time, including oscillatory patterns and chaos [7,8]. A particular focus has been on the empirically observed and well-known "bull-whip effect" [3,5,8,9,10], which describes the amplification of the oscillation amplitudes of delivery rates in supply chains compared to the variations in the consumption rate of goods.A promising approach to the non-linear interactions and dynamics of supply chains is based on "fluid-dynamic models" [5,9], which are related to macroscopic traffic models [3,4,5]. In contrast to classical approaches like queueing theory and event-driven simulations, they are better suited for an on-line control under dynamically changing conditions. These fluid-dynamic models have recently been generalized to cope with discrete spaces (production steps) [3,5]. However, the impact of the topology of supply networks, connecting the subject to the statistical physics of networks [11] has not yet been thoroughly investigated. Its relevance for the stability and dynamics of supply networks will, therefore...