B2B and B2C supply chains: To be or not to be?

The last-mile supply chain is fragmented partly because historically it has been a business-to-business (B2B) affair where supply chains were more predictable.

Goods were sent from a warehouse to the workplace — be it an office, factory or store — at fixed times and in predictable quantities. Furthermore, there would always be someone available to receive the package, minimising the chance of unsuccessful deliveries.

With e-commerce and the transition to a business-to-consumer (B2C) supply chain, deliveries now need to go to many different addresses, in many shapes and sizes, and residents may not be at home, resulting in unsuccessful deliveries.

Associate professor Tay Huay Ling, head of the international trade minor at the Singapore University of Social Science (SUSS), says there tends to be higher variability in customer demands in parcel sizes and delivery times, making it challenging for last-mile logistics players to optimise and allocate limited delivery resources (drivers & vehicles) when planning last-mile logistics.

Olive Tai, co-founder and managing director of e-commerce enabler Synagie, says the biggest difference between having to manage B2B and B2C supply chains is that the fluctuation in volume is very different between the two.

For example, when businesses import goods, they do so in very large volumes, quantified in terms of pallets or even containers. However, B2C sellers import on a much smaller scale, perhaps bringing in goods on the scale of pieces.

Tai also says that B2B last-mile logistics are more predictable. For example, a business can confirm an order with the warehouse operator by 12 noon and receive the order by 5pm the next day.

A company doing retail sales, she says, will also generally order the same amount of goods from week to week or month to month. At most, they will order more inventory during certain times of the year like Christmas and Lunar New Year, which can be planned for.

In contrast, B2C logistics are more unpredictable. Orders can be made at any point of the day and sometimes an order will be made up of many goods from different brands.

This means that warehouse staff have to quickly consolidate the order and deliver it to meet service level agreements imposed by the e-commerce platform, says Tai.

Order fluctuations in the e-commerce realm can differ greatly, especially during sale periods like 11.11, where orders can spike up to 30 times the normal “business as usual” load, she adds.

Can this can be solved by simply having more warehouse space to process the packages? Apparently not. The infrastructure model has to change so as to lower costs and optimise resources, says Tai.

“If your BAU [business as usual] utilisation is only this much and you go and rent a [large] space just for [sales], it becomes very expensive. When you talk to the warehouse provider about the rental, they will ask ‘how much space can you commit?’ That’s a very hard question to answer. Should I cater for BAU or cater for expansion?” says Tai.