Business to Business (B2B) E-Commerce

The Dynamics, Rationale, and Challenges

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There are many types of e-commerce, but perhaps the most common is business to business (B2B) e-commerce. This type of transaction is when both parties involved are businesses. Not all consumers are familiar with this type of e-commerce, though, since most of their own transactions would be classified as business-to-consumer (B2C) e-commerce. Mass marketing, such as TV and internet ads, focus on this because it is consumers they are trying to reach, but more money is exchanged overall in B2B e-commerce transactions.

B2B e-commerce comes in several forms.

Optimizing Procurement

Manufacturers that rely on steady supplies of raw materials need to maintain large inventories to ensure production continues uninterrupted. Letting inventories get too low puts manufacturers at risk of not being able to find a supplier that can provide materials in time.

Maintaining these inventories requires a large team to interact with multiple suppliers to procure the right quantity, quality, and price. Accounting departments work closely with this team to reconcile data with vendors.

E-commerce helps to automate much of this process for businesses. For instance, an e-commerce system can constantly monitor inventory levels of manufacturers' raw material as well as the inventory level of suppliers. At the right time, the system can automatically trigger an order to the best supplier. When running efficiently, such a system can help manufacturers operate with lower inventories, get better prices, and reconcile accounts in real time.

Managing Sales Channels

Much like an e-commerce system can help optimize procurement, it also can streamline transactions with agents, affiliates, and distributors a business uses for sales.

By integrating an accounting system with partners, businesses can make sure there will not be any large-scale reconciling process later. Also, sales and inventory levels can be monitored in real time to make appropriate channel decisions.

Order Fulfillment

Third-party logistics partners can help with needs such as delivery and warehousing for online sales. As customers demand faster and more accurate delivery cycles, e-commerce systems can manage the necessary logistics. When a customer orders a product on Amazon, for example, the online store communicates electronically with a shipping partner that transports the product to the customer's door.

What Are the Benefits?

At its core, B2B e-commerce helps because it transmits and synchronizes data in real time and reduces cycle time for businesses. Algorithms can utilize the real-time data to assist sales and marketing, and inventories can be maintained efficiently with auto-triggered order placements All of this leads to higher productivity, lowered costs, improved quality, and faster delivery.

Any business can set up a B2B e-commerce website or participate as vendors in online marketplaces. Buyers can set up websites to post your requirements and view sellers' proposals. Sellers can set up websites where buyers browse through offerings and place orders, much like B2C e-commerce systems might operate.

Businesses of all kinds can participate in virtual marketplaces that attempt to match buyers and sellers. These marketplaces can be most beneficial for small businesses that may not have the need or desire to develop and maintain its own e-commerce website.