Supply chains are a fundamental part of how businesses operate; they are key players in getting a product to another user. However, the user can be very different when it comes to doing business.
The two most common transactions are business-to-consumer (B2C) and business-to-business (B2B) when it comes to selling goods and services. In B2C, the goods and services are sold to a consumer who is the end-user of the product. However, in B2B, goods and services are sold between companies. The relationships are integral to businesses and it’s important to understand how their supply chains vary to suit their business model. Often you will experience differences in the negotiation approach, how long the supply chain lasts, how many customers are involved, and the number of items ordered.
Negotiating in the supply chain
Negotiation in supply chains can involve payment terms, performance indicators, prices, quantities and more. In B2B relationships, there is a significant level of negotiation that occurs in the supply chain. It comes into play much more than in B2C, where consumers don’t have as much negotiation power in their purchases.
When a company is trying to manage their stock control, they will try and optimise supply chain deliveries and quantity amounts to suit their warehouse capacity. Businesses selling the products might want to send bulk shipments to the buyer on the other end. However, that buyer’s warehouse might not be able to cope and those quantities would impact the health of their stock control.
Who has the shorter supply chain?
B2B supply chains are generally shorter than B2C. Their transactions might be more direct and short supply chains are effective at delivering what their buyers need, between a few companies. Conversely, B2C supply chains often require input from more players. Their supply chain might have multiple producers, wholesalers and retailers before it lands into the hands of the consumer. B2B companies usually have to manage stock control for a few key items that they sell in bulk, whereas B2C companies might have more inputs from more suppliers for specialised products. This means their chain gets longer and longer.
Differences in customer numbers
Customers vary when it comes to supply chains. In general B2C businesses have a higher number of customers that they engage with. It’s important for both B2B and B2C to manage their relationship and keep customers satisfied. However, it becomes harder for B2C to do this at times when the scope of their end-users is so large.
B2B have the opportunity to build close-knit relationships with those that they do business with. There may not be many of them, but the relationships along the supply chain are important due to the financial significance that each one brings. A B2B company may only have a handful of key accounts. Each of those accounts could keep their business afloat and revenue looking good. If a relationship is managed poorly and you lose one of these accounts, it could put your business in jeopardy.
However, at the end of the day, maintaining healthy supply chain relationships and seeking customer satisfaction is supremely important in both B2B and B2C transactions.
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.