Originally published in Brushware, March-April, 2023
According to Insider Intelligence, the US B2B e-commerce sales will be over $2 trillion by 2024. Digital Commerce 360 said that manufacturers’ B2B e-commerce sales have been growing at an annual rate of 16% since 2016 which is almost 1.5 times faster than total manufacturing sales. The opportunity is vast to grow even faster than the averages as not all manufacturers are willing to jump into the mix. Those with value-added B2B e-commerce
As customers see the advantage in gaining the “and” of improved support and greater collaboration with lower costs of going direct to manufacturers, sales will continue to increase for manufacturers that invest in B2B e-commerce. It is not for the faint of heart in that you’ll have to upgrade your systems infrastructure to accept online orders, provide inventory visibility, and tie it with your ERP system. Additionally, manufacturers will have to proactively address changes to their ability to pick, pack and ship smaller orders on a more frequent basis. On the other hand, those that offer this capability will grow faster than the competition, and, more importantly, they will develop a closer relationship with their customers.
For example, a bike helmet manufacturer wanted to take advantage of potential e-commerce sales; however, their greater near-term opportunity was in B2B e-commerce. In order to provide greater capabilities for their B2B partners, they upgraded their B2B capabilities with system upgrades. Since their customers gained a superior customer interface with value-added reports and capabilities, the company was able to leverage this advantage in the marketplace.
Additionally, by virtue of having B2B e-commerce capabilities, their B2C e-commerce capabilities and related customer opportunities grew as well. In concert with these upgrades, they also upgraded their ERP system, warehousing process capabilities and warehouse automation so that they could increase their efficiency, accuracy, and responsiveness simultaneously to meet these increased demands without negatively impacting operations.
Similarly, a hand tools manufacturer saw a significant opportunity in e-commerce sales during the pandemic. From a sales perspective, they could take orders from B2B customers as well as consumers to support aggressive and rapid sales growth; however, there were challenges in meeting customers expectations from a distribution perspective. Since their strength was in support B2B customers and their ability to pivot in manufacturing to changing needs and incorporate product changes rapidly, they wanted to focus on how to best serve these priority customers.
Thus, they performed an internal analysis as well as a 3PL analysis to determine the requirements and costs to pick, kit as needed, package, pack, and ship pallets (typically required for B2B) as well as pieces (typically required for B2C) while supporting a quick delivery window for their customers. Although they could scale up internal operations, space was limited, and so they decided to focus the 3PL experts on the B2B e-commerce customers to drive improved performance for the customers while looking for opportunities for efficiency and cost improvements in warehousing and freight. They kept the rest internally while focusing efforts on the 3PL pilot for quick scalability and dedicated expertise.
E-commerce trends will continue to increase as customer personalization and customization differentiate from the competition. It is not one size fits all but taking steps forward will open up opportunities. The proactive companies will thrive whereas the stodgy will see their competition race by.