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B2B and B2C Model: Supply Chain Research Paper

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Updated: Aug 28th, 2021

Introduction

In both types of businesses, B2B and B2C, the organizational structure needs to ensure that supplier relationships, supply chain, and supply base strategies are focused on the strategic goals of the organization. Because the supply chain involves changes in numerous functions and organizations, it is important to consider the sensitivities involved with this controversial subject matter. It is possible to say that both B2B and B2C are based on similar supply chains but they differ in a number of operations and intermediaries determined by the nature of business. The supply chain is defined as “a col­lection of physical entities such as manufacturing plants, distribution centers, con­veyances, retail outlets, people, and information, which are linked through processes such as procurement or logistics, to supply goods or services from source through consumption” (Cohen and Roussel 2004, p. 35).

Main body

The main difference between B2B and B2C is that B2B has one supply chain (supplier to the company) while B2C has two supply chains (supplier to the company, and the company to the consumer. In this case, in the B2C model at each stage of a supply chain, the bargaining power of buyers has a strong influence upon the prices charger, and the industry structure. In the supply chain for the computer industry, for example, the buyers include con­sumers, wholesalers, supermarket chains (Cohen and Roussel, 2004). The amount of power that each buyer exerts can differ substantially. These specific features have not been taken into account as well. The research does not include limitations of the hypothesis connected with the high cost of software, solutions which are very different from buy-side and sell-side perspectives, security of data that cannot be guaranteed by both sides (Lucas, 1994).

In the B2C model, distribution is more extensive in comparison with B2B. For instance, Wal-Mart is one of the best examples of an extensive supply chain. Goods or services start out as raw materials and move through the company’s logistics and production system until they reach customers. To manage the supply chain, a company tries to eliminate delays and cut the number of resources along the way (Cohen and Roussel 2004). This can be accomplished by streamlining the company’s in­ternal operations or by reducing inventory costs by asking suppliers to put off deliv­ery of goods—and their payments—until the moment they are needed. Information systems make efficient supply chain management possible by integrating demand planning, forecasting, materials requisition, order processing, inventory allocation, order fulfillment, transportation services, receiving, invoicing, and payment. In the N b2C model, companies pay special attention to the planning process and on-time delivery. “The plan should have a shorter time horizon, perhaps one year, and the relationship should be collaborative and trustworthy” (Supply Chain Management, 2003).

The example of Wal-Mart shows that B2C has more channels a product must flow. In the B2B model, there are fewer channels a product flows. The case of Dell B2B operations vividly portrays that fewer channels allows the company to introduce a data exchange system and supports its daily operations. This has resulted in an increased efficiency of the production process because suppliers can determine more accurately what Dell needs on a daily basis to fill orders (Sanders 2005; Neylor 2002). Because of this Internet-based supply chain management system, Dell is able to achieve a four-hour production cycle time: “it notifies its suppliers about what components are needed and they are delivered in an hour and a half” (Neylor 2002, p. 34). From both a free-trade and a multinational perspective such strategic initiatives facilitated by IT as B2B (supply chain management) and e-commerce in general (B2C) through the use of the Internet have greatly enhanced both the ability to acquire cost-effective productive inputs (supply-side) and expanded the consumer base on the demand side (Cohen and Roussel 2004). Access to a wide supply base that delivers products at an acceptable level of quality, on time, and in the right quantities goes a long way towards achieving a retailer’s product management objectives, and stocking products from sources of supply that have particular meaningfulness for the final consumer, in terms of brand recognition or product expertise.

In the B2C model, branding and marketing play a crucial role in contrast to the B2B model. In the B2C model, core elements and core activities are key to customer value. More important, they drive other elements and activities in the business. A context activity for Ask Jeeves is the design of different interface menus to meet particular customer needs (Cohen and Roussel 2004). And as new devices emerge and become part of the critical backbone for dot-com operations, every company will need to develop a strategy for the dot-com world. Ultimately, business strategy will be dot-com strategy (Cohen and Roussel 2004). The key to this idea of an interconnectivity between companies lies in the availability of vast network technology that enables separate entities to freely communicate vital information to enhance the process of providing goods and services to customers. This empowers B2C companies to supply products without having to carry significant inventories. Supply chain management systems can create value not only by lowering inventory costs but also by delivering the product or service more rapidly to the customer.

B2C has a great number of smaller channels in comparison with B2B. Supply chain management systems can create value not only by lowering inventory costs but also by delivering the product or service more rapidly to the customer. Supply chain management can be used to create efficient customer response systems that respond to customer demands more efficiently. The convenience and ease of using these information systems raise switching costs (the cost of switching from one product to a competing product), discouraging customers from going to competitors (Naylor 2002). For instance, the initial strategy of Amazon.com was to create two distinct custo­mer bases: the business to customer sector (B2C) and the business to business (B2B) sector the former would concentrate on selling books to consumers (book buyers). The latter included publishers and resellers. To add value to the latter customer group Amazon.com set up specialist groups within the organization to cater to these markets. Amazon Advantage focused on publishers, whereas Amazon Associates concentrated on book resellers. In both business models, B2B and B2C “the more effective supply chain integration, induced by effective practices, will create new responsibilities for functional experts. Supply chain integration depends on exchanges of data and technical capabilities to promote mutual goals between a buyer and seller” (Cohen and Roussel 2004, p. 39).

Conclusion

In sum, technological innovations have changed supply chains and business relations. The main difference between B2B and B2C models is number of intermediaries and channels in their chains. Only with such exchanges can buyer and seller work together to improve the supply chain as a whole and thereby improve the performance and cost levels that the company and its suppliers experience together.

References

  1. Cohen, S., Roussel, J. (2004). Strategic Supply Chain Management McGraw-Hill; 1 edition.
  2. Lucas H.C. (1994). Information systems Concepts for Management. McGrawHill, 1994.
  3. Naylor J. (2002). Introduction to Operations Management, 2nd Edition Pearson Education.
  4. Sanders, N.R. (2005). IT Alignment in Supply Chain Relationships: A Study of Supplier Benefits. Journal of Supply Chain Management, Spring, 41 (1), 2
  5. Supply Chain Management in a Wal-Mart World (2003).
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IvyPanda. "B2B and B2C Model: Supply Chain." August 28, 2021. https://ivypanda.com/essays/b2b-and-b2c-model-supply-chain/.

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IvyPanda. 2021. "B2B and B2C Model: Supply Chain." August 28, 2021. https://ivypanda.com/essays/b2b-and-b2c-model-supply-chain/.

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IvyPanda. (2021) 'B2B and B2C Model: Supply Chain'. 28 August.

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