Manufacturing Opportunities in e-Commerce
By Lisa Anderson
According to Insider Intelligence, U.S. B2B e-commerce sales will be over $2 trillion by 2024. Digital Commerce 360 says that manufacturers’ B2B e-commerce sales have been growing at an annual rate of 16 percent since 2016 which is almost 1.5 times faster than total manufacturing sales. The opportunity is vast to grow even faster than the averages as not all manufacturers are willing to jump into the mix.
As customers see the advantage of improved support and greater collaboration in addition to the lower costs of going direct to manufacturers, sales will continue to increase for manufacturers that invest in B2B e-commerce. It is not for the faint of heart as companies have to upgrade systems infrastructure to accept online orders, provide inventory visibility and tie it in with an existing ERP system. Additionally, manufacturers will have to proactively address changes to their ability to pick, pack and ship smaller orders on a more frequent basis. On the other hand, those that offer this capability will grow faster than the competition, and, more importantly, they will develop a closer relationship with their customers.
For example, a bike helmet manufacturer wanted to take advantage of potential e-commerce sales; however, their greater near-term opportunity was in B2B e-commerce. They took the opportunity and upgraded their B2B system capabilities. Their customers gained a superior customer interface with value-added reports and capabilities and the company was able to leverage this advantage in the marketplace.
Additionally, by virtue of having B2B e-commerce capabilities, their B2C e-commerce capabilities and related customer opportunities grew as well. In concert with these upgrades, they also upgraded their ERP system, warehousing process capabilities and warehouse automation so that they could increase their efficiency, accuracy and responsiveness to meet these increased demands without negatively impacting operations.
Similarly, a hand tools manufacturer saw a significant opportunity in e-commerce sales during the pandemic. From a sales perspective, they could take orders from B2B customers as well as consumers to support aggressive and rapid sales growth; however, there were challenges in meeting customers’ expectations from a distribution perspective. Since their strength was in supporting B2B customers and their ability to pivot in manufacturing to changing needs and incorporate product changes rapidly, they wanted to focus on how to best serve these priority customers.
Thus, they performed an internal analysis as well as a 3PL analysis to determine the requirements and costs to pick, kit as needed, package, pack and ship pallets (typically required for B2B) as well as pieces (typically required for B2C) while supporting a quick delivery window for their customers. Although they could scale up internal operations, space was limited, so they decided to focus the 3PL experts on improved performance for B2B e-commerce customers while looking for opportunities for efficiency and cost improvements in warehousing and freight. They kept the rest internal while focusing efforts on the 3PL pilot for quick scalability and dedicated expertise.
E-commerce trends will continue to increase as customer personalization and customization differentiate from the competition. It is not one size fits all but taking steps forward will open up opportunities. The proactive companies will thrive whereas the stodgy will see their competition race by.
Lisa Anderson is the founder and president of LMA Consulting Group Inc., a consulting firm that specializes in manufacturing strategy and end-to-end supply chain transformation that maximizes the customer experience and enables profitable, scalable, dramatic business growth. Her new eBook is “SIOP (Sales Inventory Operations Planning): Creating Predictable Revenue and EBITDA Growth” and is available on the LMA Website at: www.lma-consultinggroup.com/siop-book/.
