Supply Chain Management
It is first necessary to understand what a supply chain is all about. It is a chain of events or procedures that a product needs to undergo right from the shop floor until it reaches the hands of the ultimate customer. (Johnson, 2005). In the case of a business-to-consumer (B2C), it is seen that the customer may go into a store and makes a purchase, or uses his credit card to make an online purchaser over the internet.
When the relationship established is between the business and the ultimate consumer, it is termed as B2C. For example, if a customer wished to book an online flight ticket from London to Singapore, and also wished hotel reservation at a Singapore hotel, he would request his travel agent to book air tickets and hotel reservations. Thus the flow would be in terms of customer→travel agent →ticketing office →hotel reservation →back to the customer.
Thus it is seen that the supply chain in the case of B2C is more complex, and involves more intermediaries than in the case of B2C. While B2C is direct and involves only the buyer and the ultimate consumer, in the case of B2B, it involves several layers of independent transactions, and the supply chain is that of Business to Business format. Therefore it could be said that while Business to Business (B2B) invokes exchange of products, services, or information between businesses per se, business to consumer (B2C) involves the sale in most cases to the ultimate consumer, thus finalizing the deal.
There are several differences between B2B and B2C businesses. It could be seen in terms of the following:
- Market size: The market size of Business to Consumers (B2C) may be larger when compared to B2B firms. However, if the dollar value is taken, B2B business is significantly higher than that of the consumer market.
- Buying process: In a typical B2B business, it is observed that the buying process is longer and involves more players. Sometimes, typical buying negotiations may draw up to a year or so, with several intermediaries, and decision-makers involved. But a typical B2C would be comparatively faster to finalize due to fewer players and shorter lead time
- Selling process: B2B businesses may be seen in the context of being more professional in their approach and may be more interested in creating demand, rather than physical transfer of assets. “For some B2B companies, this requires providing engineering data in a variety of forms. There are times where a picture tells a thousand words but once again the picture better has some text to go along with it for the search engines to catalog. While B2B may have these requirements, B2C would most likely need to explain things from laymen’s terms, but once again, a copy is important.” (Warholic, 2008).
- The cost of a sale: Since the process is wider in scope and application, the cost of servicing a B2B sale is higher in quantum than that of B2C sales. This could reflect in the net selling prices payable by the ultimate consumer. It could be safe to assume that similar products may cost more under B2B than under B2C.
- Value of sales: In most cases, it is seen that B2B entails strategic supply chain relationships between the buyers and sellers, and this is often sustained for long periods of time. Under B2B, both vendors and buyers are benefited due to achieving economies of high scale business, rebates, and constant and uninterrupted supply of goods and services. However, this may not be entirely possible in the case of B2C, where transactions may be of brick–and–mortar variety catering to immediate needs. Boeing needs the services of top tire manufacturing companies to form the Panel of Vendors for the supply of aircraft tires of specific standards and requirements. This would be a case of B2B. A car owner goes to the automobile dealer for the replacement of one of his car tires which is unserviceable. The dealer replaces the flat tire with a new one. This is a case of B2C.
- Data Integrity; it is often the case that B2B data may change in the short run. This may be due to high staff turnover in the organization, etc. In some cases, the person who may have conducted the initial discussions may not be available at the time of the final drafting of the agreement.
- High lead time v immediate sale: it is seen that under B2B, the process of finalizing business may be lengthy and lead generation needs to be converted into inquiries, and to business orders, whereas this may not be the case in B2C where the lead generation may even be non-existent in many cases. (7 key differences between B2B and B2C database direct marketing).
- Technical and non-technical negotiating: It is seen that more often than not, B2B is concerned with technical and specialized business needs. The need for installing an integrated ERP software system is a B2B requirement since only the software specialists would be able to handle it effectively. Technical aspects of the subject may need to be consulted with a panel of specialists, consultants, providers, etc. Whereas, if one were to consider the purchase of just hardware, it could come within the purview of B2C. Therefore the level of data utilization is critical in B2B but to a lesser extent in the case of B2C.
- Conclusion: it needs to be mentioned that aspects of B2B or B2C may be highly situational and circumstantial and it would not be wise to polarize these two main engines of present-day business functions. While B2B deals with wider and deeper aspects of business, B2C concerns itself with routine and standard areas, involving a direct relationship between buyers and sellers of goods and services.
While Business to consumer (B2C) is interested in the online transaction between businesses & individual consumers, Business 2 Business (B2B) is concerned with working with other businesses. (Chapter1: Overview of electronic commerce).
References
Johnson, Randy. (2005). B2B vv. B2c Supply chains. Slash Doc Beta. Web.
Warholic, James A. (2008). Internet Marketing – Online how to B2B B2C professional web services. Pwebs. Web.
7 key differences between B2B and B2C database direct marketing. Web.
Chapter1: Overview of electronic commerce. Web.