The differences between B2B and B2C warehousing
Tuesday, January 19, 2016
Perhaps there was a time when warehousing was almost entirely "business to business," or B2B. Today, a growing number of warehouse operations are involved with "business to consumer," or B2C. Some in the industry have been slow to recognize the significant differences when the warehouse operator is dealing with an individual consumer rather than another business.
There are at least three kinds of warehousing that involve B2C transactions:
- Home delivery
- Customer pickup — by the consumer
All three retail warehousing situations have these common challenges:
- The materials-handling processes are distinctively different
- Damage risks are significant and also different
- Risk of personal injury is aggravated
- The individual consumer has less experience and patience than the business buyer
Dealing with each of these unique challenges requires significant training and specialized equipment, as well as precise communication.
The term is defined as the process of handling individual orders for merchandise. At the beginning of the last century, Sears and several competitors turned fulfillment into a major operation to provide merchandise to rural America at a time when the farmers' access to retail stores was restricted by geography and primitive transportation.
Fulfillment captured the attention of the business media in the 1990s when the development of dotcom technology coupled with credit cards and new options in parcel delivery combined to create a boom in the new art of "e-tailing." A significant number of the 1990s pioneers ended with arrows in their backs, but the survivors have grown. Each year, more people rely on e-tailers to supply books, clothing and other merchandise that used to be purchased in a conventional retail store.
Within the warehouse, the materials-handling process bears considerable similarity to that used by Sears after the company constructed the world's largest commercial building on the west side of Chicago in 1906. Yet technology has progressed with the use of scanning, pick to light, voice recognition and similar options that have come down in price as demand has grown.
Outside the warehouse, use of Web technology to replace catalogs and place orders rapidly has facilitated the buying process for the consumer. Credit cards have made it easier to pay for the purchase, and package delivery services offer options to the U.S. Postal Service.
A growing number of consumers own computers and have broadband access, both prime requisites for the growth of e-tailing. As such capabilities grow in less developed parts of the world, we face the probability that international fulfillment operations will expand even more rapidly than domestic ones.
Home delivery — the last 100 feet
Like fulfillment, home delivery is not new. What is new is growing awareness of the need for excellence in performing this service. One new wrinkle is the requirement by government authorities that the old appliance and the packaging for the new one must be removed from the residence when the product is delivered. Excellence in the handling of home delivery is an important selling point for the service provider.
Specialists in home delivery emphasize hiring and orientation. They recognize the serious consequences if undesirable people are allowed the privilege of entering a customer's home. Extra care is needed to be sure the individual selected has no criminal record not only in the state where hiring takes place, but also in any place in the nation. Therefore, the credit and arrest check is much more exhaustive than many hiring procedures.
Training is also an important element. This includes mock transportation and installation situations, designed to be sure the trainee does not damage the product by mishandling the product while moving it inside the home of the buyer.
The best providers emphasize customer service, including attractive uniforms, plastic overshoes and white gloves to demonstrate concern for protecting the home of the buyer. Delivery people are trained in courtesy while dealing with the customer.
Home delivery offers materials-handling challenges. When appliances must be moved on a stairway, a handling device may be employed to reduce the risk of injury to the worker or damage to the product or the home.
Effective communication is part of the process. Because the buyer may have left work to be home when the delivery is accomplished, timing of the truck arrival can be the difference between a happy and an unhappy customer.
The best home-delivery providers recognize the importance of scheduling and communication. If a delivery promise is made for 2 p.m., the customer may be called on the day before delivery, on the morning of delivery and perhaps a half-hour before delivery. It is almost impossible to provide too much communication.
Finally, metrics and goals are an important part of home delivery. The first consideration is control of quality. A critical metric is the percentage of deliveries that were made on time. Another is the duration of the delivery process, or the time elapsed between arrival of the truck and completion of the installation. On the negative side, the percentage of failed deliveries is recorded. Other metrics are designed to ensure the service provider operates at a profit.
The most important measurement is the total cost per delivery. Elements of this cost are measurement of the number of stops per day or the number of miles traveled per delivery. Scheduling and dispatching effectiveness are influenced by these measurements.
The problems of delivery are eliminated when the individual customer is given an incentive to come to the warehouse and pick up the merchandise that was purchased.
However, the pickup process is not trouble-free. Scheduling and communication are critical. The pickup consumer expects the same level of service that would be found in a retail store.
It is unacceptable to tell the buyer the warehouse crew is busy and the merchandise cannot be available for an hour. Delays can be controlled by staging pickup merchandise at the dock, but time and money will be wasted if the buyer has a change of mind about quantity or the item he purchased. Many wholesale distributors have a store adjacent to the warehouse that is designed to accommodate the "walk in" buyer.
Some warehouse operators ask the pickup customers to schedule an appointment in order to receive better service. If appointments are used, the warehouse operator is obviously required to honor the appointment, but the buyer may not be motivated to do so. Scheduling and communication are critical to the success of any warehouse pickup program.
Customer pickup has peculiar risks. When individual consumers enter a warehouse environment, they may be unfamiliar with the rapid movement of commercial trucks outside the facility and forklift trucks within it. Therefore, there is a risk of personal injury. If the consumer is less than honest, theft or pilferage could accompany pickup of the designated merchandise.
Sometimes a buyer may come to make the pickup accompanied by small children, who create a special hazard.
Finally, accuracy is critical. Filling the order with the wrong merchandise will create a particularly high level of irritation when the customer has invested the time to make the pickup and ends up with product that was not ordered.
Moving from B2B into B2C
If business-to-consumer transactions are more common today than before, it is equally likely that both space and labor are wasted because your managers have not adapted to the special requirements of dealing with consumers. Yet this is an opportunity as well as a problem.
Your ability to develop superior storage and materials-handling systems to handle consumer requirements can provide a competitive advantage in an industry that has been slow to recognize the growth opportunities in B2C transactions.
With all its peculiarities, it seems certain that warehousing to support retail will grow. E-tailing is growing faster than brick-and-mortar stores, and fulfillment is an integral part of the process. When the product purchased is too big to be carried away by the buyer, home delivery is a necessary step.
Finally, retailers frequently eliminate the delivery problem by persuading the buyer to come to the warehouse and pick up the merchandise. All three of these retail variations provide unusual opportunities, as well as peculiar risks.
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