Supply Chain B2b Vs. B2c

Supply Chain B2B vs. B2C

The recent invention of the microprocessor has enabled businesses to evolve due to technological advances fostered by the invention of the computer, improvements in transportation, and global communications, all dependent on the microprocessor. Of importance has been the computer and voice and data communications systems; the lifeblood of many businesses today. The proliferation of computers in businesses and in homes and the growth of the internet and the World Wide Web eventually led to electronic commerce or e-Commerce.

E-Commerce in simplest terms is the buying and selling of products and services electronically using computers to send order and payment information over the internet. E-Commerce takes place in many different forms; business to business (B2B), business to consumer (B2C), business to government (B2G), and more recently consumer to consumer (C2C) using auction sites such as eBay. The form of e-Commerce most people are familiar with is probably business to consumer or B2C. B2C has been growing over the last several years and this growth is expected to continue well into the future. Business to business or B2B e-Commerce has been in existence much longer in various forms and is still growing with expanding global business and global trade.

Since e-Commerce is the buying and selling of products and services, there must be an underlying methodology of moving products from business to business or business to consumer. Traditional B2C is straightforward as the consumer goes to the store, purchases the product, and leaves with the product; but an online purchase becomes more difficult. B2B purchases of materials and products also seem straightforward on the surface but can be quite complex. The method of moving materials and products has also evolved as technology has evolved and businesses have grown. This method of moving materials and products is now commonly known as supply chain.

What is Supply Chain?

Supply chain by definition is "The optimal flow of product from site of production through intermediate locations to the site of final use." (Supply Chain, 2006) This definition, although simple, points out two key elements of a supply chain. First, a supply chain must move product optimally from point to point leading to the conclusion that a supply chain must be optimized for efficiency. Secondly, a product may move through many intermediate locations from its initial starting point to final destination. The assumption can be made that each intermediate location should also be optimized for efficiency to achieve total end-to-end optimization.

A much more detailed definition of supply chain exposes several additional components:

"The supply chain represents the flow of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer. Many organizations are looking to supply chain optimization as a means of gaining significant competitive advantages." (Niven, 2006)

We can see from this definition that supply chain entails more than just the movement of materials but information and finances as well. This definition also emphasizes the different intermediaries that materials, information, and finances move through. And again, supply chain optimization at every step of the process is critical for competitive advantage in today's highly competitive business climate. With this understanding we can now look at the supply chain of B2B and B2C businesses.

B2B Supply Chain

The more complicated supply chain is the B2B supply chain. This type of supply chain can be a simple tier one relationship between a business and a small number of suppliers. This relationship is easier to manage once the business processes between the business and suppliers are mapped and optimized for efficiency. Tier two and tier three supplier relationships become much more complicated as relationships must be established between not only the business and suppliers but between suppliers as well. The process mappings and optimizations become exponentially more difficult to manage and a problem in the supply chain at any point can have an impact throughout the supply chain.

B2B requires negotiations between business and suppliers and often between suppliers. Negotiations include material pricing, delivery quantities, quality, and timing. B2B also requires back-end systems integration between the business and supplier systems to fully automate the ordering, receiving and payment of materials. This is a requirement for the optimization of the supply chain previously described. In addition to integrating the back-end systems with possibly multiple suppliers is the initial building of trust required to share sometimes confidential information with suppliers. This requirement is a concern that is difficult for many organizations to overcome.

Although in B2B the probability of multiple business to supplier relationships is likely, that number is small in comparison to B2C relationships, thus the number of shipping channels in B2B is minimal and generally fixed. B2B relationships and the integration of back-end systems may also require multiple methods of communicating information between these oftentimes disparate systems. As stated in our text "clear communications, and quick responses to those communications, are a key element of successful supply chain management." (Schneider, 2004, pg. 229) The Internet in the form of extranets is increasingly becoming the communications medium of choice between businesses and suppliers. The Internet may be costly but the value derived from the advantages the Internet provides far exceeds the cost.

A B2B supply chain can be demonstrated by using the example of a tire for an automobile. The rubber must be harvested from trees in specific countries. The raw rubber is then put on ships and sent to tire manufacturing plants to be made into tires. Tires are not only made of rubber but also contain nylon, steel and other materials that make them tougher, ride smoother and last longer. The tires are then sent to automobile manufacturers or tire retailers. As can be seen from this example, the supply chain is extensive and must be coordinated between many different suppliers for the supplies to come together at the right place, at the right time, in the right quantities. Systems integration, supplier coordination, and delivery channels must all be optimized to work in coordination.

B2C Supply Chain

A B2C supply chain is less complex in some ways over a B2B supply chain but more complex in other ways. A B2C supply chain deals with an entirely