The Covid Pandemic has made many businesses do a deep think about what they do. With inventory-focused businesses, most traditionally focus their business on their current sales strategy which has made them historically successful – not on their logistics or business capabilities.
Much is written about which model is appropriate for a business. Very little is written about “Why choose only one business model”?
Infoware Services is seeing a paradigm shift to a blended mix of multiple business models.
Most inventory businesses see themselves as one of the following:
- B2B (Wholesaler): Purchase stock and sell/ship directly to business customers.
- B2C (Retailer either Bricks and Mortar or Website or both): Purchase Stock and sell/ship directly to the consumer.
- 3PL (3rd Party Logistics): Store/receipt/pick/ship other suppliers’ stock. Income stream from storage, service and delivery fees.
- B2B2C (Dropship/marketing). Many businesses sell products to their customers (B2C) through an e-commerce platform. Rather than be hemmed down by limited stock holdings with associated capital and stock holdings; they directly sell their suppliers’ stock.
This removes stock holding and distribution overheads – but equally important, dramatically increases the range of products offered (all of each supplier’s stock lines). The B2B2C business focuses on what they are good at – marketing and sales. They never physically touch or own the product. Supplier (wholesaler or 3PL) focuses on what they are good at – supply and distribution.
Customers have high expectations of correct stock availability and prompt delivery. For B2B2C to work, EDI for immediate exchange of customer orders and return of picking/shipping instructions is critical.
There are advantages and disadvantages to each model, but businesses realise that the ‘back end’ services are the same. Stock control, picking, stock visibility, ecommerce customer web portal, and freight delivery for ALL the above business models are all very similar. They can adopt more than 1 business approach in their daily activity. There are mutual benefits to both business partners by blending 2 (or more) models.
A “traditional wholesaler” may also keep 3PL suppliers’ stock on site for the same product range to market. There can be additional synergies from this congruence of business:
- The Wholesaler may sell the 3PL products to their customers (your system should be able to generate Recipient Created Tax Invoices (RCTIs)) to remove administration). The wholesaler does not own the 3PL stock so removes stock on hand tying up capital and restricting cash flow but retains making an immediate margin/commission on sale. Also, potential benefits of increased deliveries to shared customers adding more freight revenue per delivery drop.
- The 3PL supplier benefits directly with a potential increase in sales storing with a wholesaler/3PL distribution centre focusing on their industry and selling their stock.
The business challenge is finding a pairing of B2B and B2B2C who by their collaboration add value to the customer.
The technical challenge is that accuracy of stock availability and quick delivery is critical (as in all business models – but in B2B2C the customer is not dealing directly with the shipping provider). For B2B2C’s long term success there must be:
- Accurate stock availability information.
- Electronic price lists for B2B reflecting price changes including new products communicated across all platforms.
- EDI of customer orders to end business (supplier) so orders can be picked ASAP.
- Shipping in marketing company’s branded packaging.
- Acknowledgement of order picks and shipping back to the marketing company.
When EDI of customer orders is mentioned above this does not have to be a formal EDI (Electronic Data Interchange) with your customer or another e-commerce platform. Infoware has the ability to extract data from your customers’ PDF orders (searchable) and automatically create customer orders without all of the usual hassles and costs of establishing formal EDI communication with your customers.
If you feel your current system is too restrictive to be able to flexibly compete using different business models concurrently, then contact Infoware Services for a free demonstration.