B2B and B2C fulfillment are two very different operations with different requirements, volumes, and levels of predictability and urgency. As such, many companies keep these operations separate - with multiple distribution structures and strategies – instead of creating a master fulfillment strategy for multiple sales channels.
This is a mistake. We now live in a multi-channel world. To make a profit in this world, you need a unified approach to distribution for all your sales channels, with a focus on managing the “three I’s” – inventory, infrastructure and information. In this blog post, we’ll see how this approach can be realized through partnership with a 3PL with multi-channel capabilities.
B2B and B2C Differences
B2B and B2C operations have different demand requirements, volumes, predictability, and urgency. B2B fulfillment is highly predictable, with a high frequency of similar orders handled daily or even multiple times a day. B2B operations look to 3PL providers to decrease inventory, reduce costs, and implement customization and special projects as needed. There is less labor involved per sellable unit due to the bulk nature of the business. Importantly, B2B customers are buying and selling professionals whose livelihoods demand flawless execution of every fulfillment component.
B2C fulfillment is less predictable, ebbing and flowing with the behavior of the buying public. There is more 3PL labor involved per sellable unit due to the need for picking and packing of individual customer orders, versus picking pallets for retail replenishment. Successful 3PL partners can navigate the volatile demand, irregular activity, and volume spikes inherent in B2C operations.
One 3PL to Fulfill Multiple Sales Channels Together
Despite these differences, many 3PLs can serve multiple channels together under one cohesive fulfillment strategy. How? Well, first they must have the space, labor, capabilities, and capacity to handle each channel individually. Handling both together can then just be a matter of combining both operations into one large, highly-coordinated operation. That can only happen if the groundwork is laid properly at the start.
Whether it’s B2B, B2C or both, the success or failure of these fulfillment operations largely hinges upon the service level agreements (SLAs) established at the very beginning of the relationship. SLAs establish a clear understanding of level-of-service expectations in terms of quality, throughput, timeliness, execution, inventory, receipt, shipping, and other fulfillment components. SLAs allow all parties to proactively manage the fulfillment operation, while delineating responsibilities and gauging success.
With the groundwork established, the 3PL can then go to work on optimizing your inventory, infrastructure, and information.
The 3 I’s: Inventory, Infrastructure, and Information
Inventory. By storing the inventory for all your sales channels together, you reduce the amount of inventory required across your distribution network. Let’s say that you keep your channels separate and house your B2C inventory in 3 locations and your B2B inventory in another 3 locations. That’s 6 different locations that you must keep stocked, which results in more inventory to ensure adequate stock, which then results in higher costs and a greater likelihood of being stuck with unsold items.
With this ‘separated’ model, you may also be relying on different inventory management systems with different teams executing your SLAs.
By contrast, if you store your inventory for both channels together at 3 3PL locations, you reduce the amount of inventory needed as well as the number of associates needed, and you strip inventory management down to one nationwide system.
Using sales forecasts and historical data, you can work with a 3PL to figure out what products you’ll need for each channel, where you’ll need them and when. That partner should also provide timely, accurate reports on orders and fulfillment activity, to help keep your inventory and labor force at optimal levels.
Infrastructure. Partnership with an adept 3PL enables you to fulfill B2B and B2C orders from the same warehouses and the same inventory pool. The inventory is divided into physical regions in the same warehouse, with most stock residing in a bulk replenishment area. As forecasts determine future demand, and as actual orders come in, a single warehouse management system (WMS) directs product into two forward-pick areas.
This approach allows you to keep just enough inventory to meet demand through all sales channels. A 3PL well suited to this approach has a nationwide network of facilities, all managed on one system for network-wide visibility. Such a network gives you the flexibility to meet aggressive delivery requirements for consumer orders, while keeping freight costs low.
Information. By partnering with a 3PL to handle fulfillment for multiple sales channels, you can use one system to enjoy visibility into your entire supply chain, end-to-end. Real-time inventory management, order management, and shipping/tracking management information allows you and your 3PL to proactively guide decisions and workflow – and allows your customers to stay in the know.
This approach will also position you for the inevitable day when all retail stores become satellite DCs, shipping orders to local consumers or holding them for in-store pickup.
In finding the best partner for fulfilling multiple sales channels, look for:
- Strong experience in both retail replenishment and direct-to-consumer fulfillment
- Fulfillment warehouses nationwide, all managed on one system for network-wide visibility
- Solutions that are custom-tailored to your specific requirements
Consumers today expect to buy whatever they want via any channel they choose. But don’t let that undermine the efficiency of your fulfillment network. Develop a multi-channel fulfillment strategy that simplifies and streamlines your fulfillment operations.