Business relationships for the sale of goods and services can be split up into two broad categories: business to business (B2B), and business to consumer (B2C). B2B products and services are sold from one business to another business, and in B2C, the products are sold from a business to the end user. As a result, the supply chains of these two types of business relationships have several important differences and therefore understanding the implications of each can foster growth and improvement. Key differences include the negotiation style between a buyer and seller, the length of the supply chain, the number of customers involved and the volume of sales.
A key difference between a B2B and B2C relationship is the level of bargaining power that exists between the parties to a transaction in the supply chain. In a B2C supply chain, the business tends to have a disproportionate level of bargaining power relative to the customer because of its sheer size and resources. However, in a B2B supply chain, there tends to be a levelled playing field as both parties tend to be relatively sophisticated in buying and selling.
When it comes to purchasing decisions in B2B and B2C, there is often a hierarchy in place to approve purchases. For example, one or two purchasing managers might need to persuade a board of directors to sign off the purchase. Conversely, B2C buyers make purchasing decisions relatively autonomously as they are more likely to be the end-user.
2. Supply chain length
Another key difference between B2B and B2C supply chains is that B2B supply chains are often shorter than B2C supply chains. B2B supply chains often involve just two organisations, with one selling a good or service directly to another. On the other hand, B2C supply chains often involve one or more producers, wholesalers and retailers.
3. Number of customers
The number of customers is typically much smaller in a B2B relationship than in a B2C. This has important implications for managing relationships. It can be difficult to manage the numerous relationships that come with a B2C supply chain, whereas there are often fewer customers in B2B supply chains, meaning that relationships are much closer and of vital importance where many businesses seek long term relationships as suppliers will have implications on their entire business.
B2B sales tend to be higher in volume than B2C sales. For example, a company might buy five pallets of juice, whereas a consumer might only get two bottles. For this reason, each relationship in a B2B supply chain is proportionately more important than relationships in a B2C supply chain, in which each customer may only purchase a single unit and may never be a repeat customer. Furthermore, each purchase is typically a high involved purchasing decision where units are for commercial use only and have greater value – for example, an aircraft carrier from Boeing.
Understanding these four key differences between B2B and B2C supply chains should shed light on aspects of your business relationships and serve as a fundamental basis for further improvement.
Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.