Can B2B e-commerce solve supply chain issues?
If 2020 was the year of B2C, 2021 could likely be the year of B2B. Manufacturing is gaining steam not only in the US but around the world as businesses return to a COVID-19 type of redefined normalcy.
According to IHS Markit, March US purchasing manager’s index (PMI) was the second strongest since data collection began in May 2007. The overall expansion was supported by the sharpest rise in new orders since June 2014.
The EU also recorded a strong PMI reading for March as IHS Markit noted operating conditions improving to the greatest degree in nearly 24 years of data collection.
However, as manufacturing comes roaring back, it is being met with supply chain issues such as delivery delays and higher costs.
Quarterly earnings calls from various manufacturers are beginning to blur with references to supply chain issues potentially holding back the production of goods and higher costs being passed through as higher prices to customers.
At a Berkshire Hathaway meeting, Warren Buffett said, “The supply chain is all screwed up”. (Thank you @10xLogisticsExperts for sharing this on Twitter). During W.W. Grainger’s earnings call, the CEO said, “We expect a lot of messiness in the supply chain”.
If large B2B companies such as W.W. Grainger are struggling, can you imagine how the small-to-medium-sized B2B companies are doing?
Perhaps it’s time to address the steady rise in B2B online marketplaces. Do these platforms hold the key to growth and lower supply chain angst for businesses?
W.W. Grainger was an early adopter of B2B e-commerce dating back to 1995 with the launch of its first electronic catalog. Today 71% of all of its sales are conducted online via e-commerce and EDI.
Home Depot is growing its B2B e-commerce as well. In 2019, it re-acquired HD Supply, a company it sold in 2007. As noted in Digital Commerce 360, with HD Supply, Home Depot has a good opportunity to target buyers of maintenance, repair, and operations (MRO) products with an omnichannel retail approach that enables them to purchase goods online or in-store. “The MRO customer is an important pro customer for The Home Depot,” the CEO told analysts in 2020. “The success we’ve had with our existing MRO business makes us confident in our ability to accelerate sales growth in a highly fragmented $55 billion MRO marketplace.” Home Depot’s CEO also noted, “Our B2B website is seeing record volumes and engagement with our pro customer.”
Individual company B2B e-commerce offerings are growing as are large, general marketplace platforms that originally started with a B2C focus such as those from Alibaba and Amazon. These platforms allow a multitude of businesses to participate by selling and buying goods and services while the likes of Amazon and Alibaba coordinate the logistics such as warehousing, fulfillment, and transportation in the background.
Within its Q1 earnings press release, for example, Amazon shared some interesting statistics on its B2B platform, Amazon Business. It now serves more than five million businesses and has generated $25 billion in global sales since it began in 2015. More than half of its total unit sales are from third-party sellers. In the U.S., Amazon Business serves 45 states and 80 of the Fortune 100 companies, including Citigroup, Intel, Cisco, and ExxonMobil.
A Middle-East-based B2B online platform, Tradeling, launched last year with an initial investment from Dubai Airport Freezone Authority to help businesses across the Middle East and North Africa to procure goods from around the world.
In April, Tradeling partnered with Chinese e-commerce provider, JD.com to sell Chinese products on the Tradeling platform. In a blog post, JD.com noted that Tradeling will offer free delivery service for Chinese products for a limited time. In addition, Tradeling will also study opportunities to leverage JD.com’s logistics capabilities to assist in providing faster delivery services for its customers.
For both types of online platforms, individual business and general platforms that perform some logistics activities but are either asset-light or non-asset based, there still remains the problem of securing transportation at a reasonable price and ensuring on-time delivery. For international transportation, there is the additional requirement of clearing customs.
Now, we’re seeing the potential rise of supply chain providers’ versions of B2B online platforms.
Dubai-based port terminal operator, DP World introduced DUBUY.com, a wholesale e-commerce platform last week. According to DP World, the platform utilizes its end-to-end integrated supply chain services to fulfill orders for export and to receive goods. Available in Rwanda, it plans to expand across Africa and around the world.
Mike Bhaskaran, Chief Operating Officer, Technology and Logistics, DP World said: "DP World is investing to build the future of world trade. Our vision is to create more efficient trading corridors for our customers through our ports and logistics, digital technology to make operations more efficient, and now online platforms for trade.”
It's possible we’ll see more supply chain providers launch B2B online platforms in order to keep goods within their networks from the first mile through to the final mile and for shippers to ensure capacity.
Maersk is one to keep an eye on as it builds its logistics capabilities beyond its ocean freight transportation services. Other supply chain providers that could potentially enter the B2B online platform space could be those that offer 4PL services.
As more businesses digitize, e-commerce will become the primary way of doing business. However, who will control the online platform will determine the supply chain needs and costs of the shipper.
Thanks as always for reading!
Cathy
For more, check out some recent articles I’ve written or chatted:
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