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Logistics is one of the most critical functions for all businesses. Whether it is B2C or B2B logistics, there are multiple logistics activities involved such as transportation, storage, warehousing, packaging, sorting, and so on. However, it is not a simple task and is more so difficult when it comes to B2B logistics. Several factors need to be taken into consideration including the right route, cost efficiency, timely delivery and so on. So, what is B2B logistics and how is it different from B2C logistics?
This article explains what B2B logistics mean, its difference from B2C logistics and some of the common challenges in B2B logistics.
What is B2B logistics?
In simple terms, B2B (i.e., business to business) logistics is the movement or transportation of goods between businesses. Such movement usually takes place on a larger scale and hence has special needs. There is a lot of planning and scheduling involved in B2B logistics. Moreover, many activities other than transportation such as warehousing, packaging, etc., are also involved.
An example of B2B logistics is the industrial transportation of raw material such as steel for the automotive industry. Here the material is transported from the integrated and mini steel plant to the automotive factory.
Additionally, there may also be special requirements. For example, goods such as coal, steel, etc. are bulk commodities and they need specific material handling equipment for logistics.
Another example is the transportation of pharma products from the factory to distributors. They need to be stored and transported at a certain temperature range and humidity.
Normally, logistics service providers forge a long-term contract with the customers for handling business logistics. There are several types of logistics services that customers can avail, depending on the scope of work.
Difference between B2B and B2C logistics
Is B2B logistics different from B2C? The answer to this question is, yes. This is because the business needs are different. Here are the key the differences between B2B and B2C logistics.
Volume of good transported
When goods are transported from one business to another, the volume of goods is usually large. On the other hand, when goods are transported directly to consumers, the volume is low.
For example, when hand sanitisers are transported from the manufacturer to the distributor, the order can be 1000 units or more. On the other hand, the end consumer just requires 1-2 units of hand santisers and hence logistics is arranged accordingly.
Based on the volume of goods shipped, business-to-business logistics can avail freight forward services, cargo movement services, PTL shipping services, or any other. B2C logistics on the other hand need services for next-day delivery and last-mile delivery.
Yet another difference is in packaging. When goods are transported in bulk, it needs a different kind of packaging as compared to the transportation of single units.
For example, 100 units of watches might be packaged in a large sized cartons while shipping from the manufacturer to the distributor. On the other hand, a single unit watch is packaged differently to be sent to the consumer.
While B2C logistics, pricing remains standard, the pricing methodology for B2B logistics is different. Usually, pricing of business parcels are calculated by volumetric weight. This means that the charges applicable on the B2B shipment do not depend on the gross weight of the shipment but on volumetric weight.
Here is a formula for calculating volumetric weight:
Length x Width x Height (cm) / 5000
Some other differences between B2B and B2C logistics are explained in the table below:
|B2B logistics vs B2C logistics
|Shipment is made from one business to another enterprise.
|Shipment is made to the end consumer.
|Logistics companies have an annual or long-term contract with the consignee.
|There may or may not be a long-term contract. Some deliveries may happen as a one-time sale only.
|Goods are shipped in large quantities.
|Goods are shipped in smaller quantities.
|Focus is on providing cost-efficient, reliable service.
|Focus is on quick, reliable last mile delivery service.
|The cost of shipping is high and it may take longer time to reach too.
|The shipping cost is lower, and the order is delivered to the customer within a few days.
Challenges in Business to Business logistics
Here are some of the major challenges in B2B logistics.
- Order tracking: Tracking the status of a shipment is crucial for B2B systems as it enables businesses to prepare and plan. Though most logistics companies use tools to track orders with Tracking numbers it is not entirely foolproof. Moreover, there are unforeseen delays that often make it challenging for logistics companies to deliver on time leading to overall challenges in the B2B supply chain.
- Cost efficiency: B2B deliveries are complex especially if they are multi-modal or the delivery has to be made in the international market. Increasing fuel costs, challenges related to the maintenance of the fleet, supply chain related challenges, etc., make cost efficient deliveries difficult for logistics companies. The rising costs affect the profit margins of the logistics companies.
- Customer support: One of the common problems in business logistics is the inability to provide efficient, prompt customer support throughout the journey. This may result in not getting repeat orders. With improvement in customer service, logistics can gain customers’ trust and hence get more business.
- Route planning: Poor planning and lack of route optimisation can lead to delays in deliveries. Additionally, it also counts for losses for the logistics companies. In the digital era, there are software solutions available for route optimisation and fleet management.
As a business that hires logistics services, you need to choose your 3PL partner carefully. Make sure the company focuses on customer service or else it may turn out to be a disappointing experience for you.
As a logistics service provider, there are multiple challenges you need overcome such as cost efficiency, route optimisation, etc. However, digitalisation can minimise most of these challenges and help you foster growth.