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Running B2B and B2C operations in the same warehouse:Running B2B and B2C operations in the same warehouse

Nov 29, 2018
Online retailers can cost effectively expand their routes to market by running B2C and B2B operations from the same warehouse. However, this brings some tricky challenges that must be addressed for this type of approach to work effectively.

With the inexorable rise in the use of the Internet as a medium for selling products, the need to have a selling presence online is something no merchant can avoid.

A generation of ‘pure play’ retailers have grown up with the Internet, and many of these have – or at least start off with – no ‘on the ground’ store presence. However, a substantial portion of retailers will use both direct to consumer shipping and distribution in bulk to stores and third party sellers like Amazon. Indeed, the pressure to use all available channels to market will only grow over time. Retailers in this position need to simultaneously run B2C fulfilment and B2B distribution operations, often from the same site.

The challenges of running both B2B and B2C operations

This raises complex challenges from a warehousing point of view, as fulfilment direct to consumer (B2C or consumer) and bulk distribution to stores and other physical sales channels (B2B or trade) are very different beasts.

Order size: B2B orders tend to be much larger, both in terms of the number of lines and the product quantity per line than individual customer orders.

Storage: B2B stock will invariably be stored in large quantities, typically on pallets on racking, some of which may require fork lift trucks to access. While there may be some bulk storage of B2C stock, a significant portion of it will be held on shelves in bins that need to be easily accessible for picking.

Delivery time: It can be acceptable in some cases for there to be a delay of a few days or even weeks with trade orders. For consumer orders, this is generally unacceptable. Customers will be expecting their goods to arrive within the shortest possible time; the next day or in some cases even the same day.

Shipping: B2B orders are loaded onto pallets and either shipped using the company’s own transportation fleet or using a third party pallet distribution company. B2C orders are generally shipped using a third party carrier such as Royal Mail or DPD.

The third choice here is through a collect from store arrangement. This involves packing parcels individually at the source warehouse, but shipping these in bulk initially to one of the retailer’s stores, or to a third party collection point.

Partial shipments: With B2B orders, partial shipments can make a lot of sense. For B2C orders this can result in substantially higher shipping costs for each split order, so it’s something you probably don’t want to do unless there is a real need.

What’s the solution?

So how do you manage the varying operational challenges of a business that uses all of these distribution channels?

One way is to run completely separate operational infrastructure for the different types of channels. In practice, this may mean running separate B2B warehouses and B2C fulfilment centres. Each of these would use different operational procedures and even WMS software. The problem here is that it requires sufficient scale to justify cost.

For smaller businesses a major win is to be able to run B2C and B2B operations through a single operation, in a single warehouse using a single software platform. The potential advantages include:

  • A unified view of products, stock and orders in the warehouse.
  • The ability to share stock more effectively between B2B and B2C orders. For example, you may want to allow B2C orders to have the first claim on stock, but allow B2B orders.
  • Much lower infrastructure, staffing and software licencing costs than if you were operating separate physical operations.

Setting up a single physical operation that services multiple different distribution channels is not easy, and does present some unique challenges.

You need to be able to configure your WMS so that it can ring fence stock for your B2C orders, but not in a way that is so restrictive that it cannot be reassigned to B2B. One way to achieve this to divide your warehouse into B2B and B2C specific zones or areas, each of which can only be used for picking B2B and B2C orders respectively.

Implementing different processes

You need to be able to implement different processes for B2B and B2C orders, from putaway to picking.

Your processes for replenishment will be important because you will need processes to move stock from where it is to where it is needed in the warehouse. Ideally you will want to set up a number of replenishment schemes, including:

  • A replenishment scheme to replenish your B2C picking faces from stock that is in the B2C section of the warehouse.
  • Replenishment of your B2B picking locations from inaccessible pallet locations.

It is probably also a good idea to have a reverse replenishment that allows B2C stock to be moved back into the B2B area if necessary, but in a well-run operation that would probably not be used very frequently.

Running B2B and B2C operations in the same warehouse is much more complex than running the two types of operations separately because you have to make allowance not only for differences in the way they work in isolation, but also for how the respective processes interact with each other. However, the cost benefits for certain types of retailers can make it well worth the extra effort of setting this up.

 

By Phil Zoio, Director, Realtime Despatch Software Ltd.