Business-to-business (B2B) manufacturing is characterized by the production of goods for other businesses.
B2B manufacturers sell both to intermediaries, like distributors or wholesalers, as well as directly to other companies.
While B2B manufacturers often address the needs of large-scale industries, including automotive, aerospace, and electronics, they’re increasingly catering to smaller companies.
In all cases, the B2B manufacturing process requires a deep understanding of market trends, product specifications, and client expectations.
This article delves into the features of B2B manufacturing alongside challenges and opportunities for growth.
Wat is B2B-productie?
Business-to-business (B2B) manufacturing involves producing goods for other companies, distinguishing it from business-to-consumer (B2C) manufacturing.
In B2B manufacturing, purchasers are often intermediaries such as vendors, retailers, and suppliers. They buy products from the manufacturer and sell them on.
This isn't always the case, however. A company may purchase products from another business for its operations. For example, a hotel chain might purchase furniture directly from a manufacturer to use in its hotels. Dealing directly with manufacturers has become more common than it once was due to the rise of B2B eCommerce platforms like Alibaba and Amazon Business.
In many cases, B2B purchasing processes are more heavily personalized, involving negotiations and communication between departments such as finance, accounting, and procurement.
“I’ve found that a typical B2B buying process will involve at least three people: the CEO or owner of the business, their head of sales, and a VP of operations or other department head who has been tasked with making the final decision.”– Kader Meroni, founder of Atlas Tea Club, tells Shopify.
This process differs from B2C transactions, which are more direct and involve marketing to individual consumers, also called ‘end users.’
B2B Manufacturing Sales Channels
There are several B2B manufacturing sales channels, including selling directly to business customers or to intermediaries such as distributors.
The rise of B2B eCommerce has blurred the lines between B2B and B2C purchases, and often, manufacturers won’t know the online customers they sell to prior to purchase.
Here’s an overview of the primary B2B sales and distribution channels:
Direct Sales (Manufacturer to B2B Customers)
In the direct sales model, manufacturers sell their products directly to business customers, bypassing intermediaries. This includes scenarios like the hotel example above—a business buyer interacts directly with the manufacturer.
This enables complete control over marketing, sales, and shipping. On the downside, not all manufacturers have the capacity to handle these processes in-house.
Distributor or Partner Sales
This model incorporates a network of partners, distributors, and wholesalers, who often purchase in bulk. Manufacturers can leverage their partners’ networks, bringing their products to a broader market.
Partner sales are particularly beneficial when local commercial knowledge or language skills are essential. This includes navigating trade regulation and taxation rules, which manufacturers may find challenging to manage.
On the downside, working with intermediaries often means lower margins and diminished control over the sales process.
B2B Ecommerce Platform Manufacturing Distribution Model
This involves selling products directly to business customers through the manufacturer's website, an online marketplace, or both.
Platforms like Amazon Business and Alibaba cater specifically to B2B sales with payment integration, enterprise-grade security, and built-in marketing and analytics tools.
Buyers can range from larger businesses to small-scale entrepreneurs. This blurs the lines between B2B and B2C sales, equipping buyers with easy-to-use self-service portals and platforms.
In private labeling—essentially a branch of direct sales—a manufacturer produces goods to be marketed and sold under a retailer’s brand name. Manufacturers sometimes provide value-added services such as adding the retailer’s logos to products before shipping or creating customized components or packaging.
The manufacturer handles production, while the retailer manages marketing and sales.
Private labeling has soared in popularity due to eCommerce, particularly the Fulfilled By Amazon (FBA) program. There are some 9.5 million Amazon sellers worldwide, and 73% use FBA, creating an extensive private-label market. FBA sellers work with manufacturers to develop custom products for them to sell to customers.
B2B manufacturers often provide private labeling services through eCommerce platforms like Alibaba or directly for larger, more complex orders.
Current Challenges and Trends in B2B Manufacturing
B2B manufacturers must contend with shifting market demands, technological advancements, and complex supply chain dynamics.
Keeping ahead of challenges enables manufacturers to stay competitive in the face of emerging trends, such as the rise of the direct-to-consumer (D2C) business model and private labeling in recent years.
Rising Importance of Customized or Complex Products
Customization allows manufacturers to deliver products precisely aligned with B2B client requirements. This can range from altering existing products to developing entirely new designs with custom engineering.
While larger businesses often seek manufacturers that can accommodate their unique requirements, demand for small-batch custom products has rocketed, too.
Deloitte found that over 50% of consumers express interest in customized products, and these often command higher price points. Manufacturers that offer configurable products cater to the trend of personalization and customization, setting them apart in the market.
Innovative technology such as configure, price, quote (CPQ) software helps businesses collect customized orders and auto-generate manufacturing assets like CAD drawings and bills of materials (BOMs). This transforms a traditionally manual and error-prone process into a streamlined, efficient, and accurate system, reducing the time and cost involved in custom order processing and manufacturing.
Economic and Market Challenges
Supply chain disruption, such as trade restrictions between the US and China, has mounted pressure on manufacturers.
De IMF found that US import tariffs exceed some $250 billion on Chinese imports yearly, driving up manufacturers' costs. Manufacturers with small margins often feel the full force of supply chain disruption.
As such, forecasting supply and demand has become increasingly important. Manufacturers are investing in analytics software with machine learning functionality to help them manage external economic challenges.
For example, manufacturers can reduce costs related to overstocking or understocking by forecasting product demand across the year, accounting for factors like seasonality (the rise and fall of sales with different seasons like Christmas).
Similarly, costs might rise disproportionately across some product lines more than others—analytics helps manufacturers identify changes and take proactive action.
Workforce and Talent Management
The manufacturing sector faces a potential shortfall of more than two million unfilled manufacturing jobs by 2030. Further, the shortage of knowledge workers, particularly in software and IT roles, impedes company growth.
Investing in technologies like CPQ and ERP helps employees with their tasks, which creates a more productive environment vital for attracting and retaining personnel.
Shifting Purchasing Behaviors
The rise of eCommerce has influenced B2B purchasing, blurring the lines between B2B and B2C.
B2B purchasing via phone, email, or a sales rep is falling from preference, with a growing trend towards self-service eCommerce portals.
In fact, McKinsey found that 99% of B2B buyers are comfortable using self-service tools with order values up to $50,000.
To accommodate these trends, manufacturers must develop methods of catering to new B2B purchasing behaviors, including increasing investment in direct sales via eCommerce websites and CPQ.
Improving B2B Manufacturing Through Technology
By embracing digital transformation through technology, B2B manufacturers are streamlining their operations and gaining competitive advantages.
Here are some leading approaches for enhancing B2B manufacturing with technological innovation:
Internet of Things (IoT) in B2B Manufacturing
IoT is instrumental in creating interconnected manufacturing ecosystems.
Sensors fitted to machinery feedback data to AI systems that provide insights into everything from the state of equipment to environmental conditions.
Artificial Intelligence (AI) in B2B Manufacturing
AI is revolutionizing manufacturing with advanced data analysis, machine learning, and automation.
Leveraging data from IoT devices and business software like enterprise resource planning (ERP) and analytics software enables manufacturers to monitor production trends, predict maintenance needs, and optimize supply chain management. KPMG found that implementing AI analytics leads to smarter decision-making, improved product quality, and a 61% potential increase in productivity.
“Regardless of any global disruption, it’s important to leverage technology like AI to improve maintenance operations, product design and engineering, and supply chain to hardwire efficiencies in the operations.”- Roy Mathews is a Managing Director in KPMG's Data and Analytics Center of Excellence.
Automation in B2B Manufacturing
Automation in manufacturing involves using technology to perform tasks without human intervention. This includes deploying robotics, automated machinery, and software systems.
Automation increases production efficiency, reduces human error, and lowers operational costs.
Connecting B2B Manufacturing Technologies
Ideally, manufacturers should create a ‘digital thread’ of interconnected systems.
On the facilities and manufacturing side, AI, IoT, automation, and analytics combine to create sophisticated, low-maintenance production lines.
On the sales and business end, software like CPQ helps manufacturers collect customized orders from buyers and automatically create CAD files and other manufacturing assets. This links manufacturing and production to sales and marketing.
Other software platforms, like ERP, deliver actionable insights into accounting, transactions, and sales.
At its core, B2B manufacturing involves producing goods for other businesses.
There are several key B2B sales channels to be aware of, from direct sales and partner sales through distributors or wholesalers to eCommerce.
It's vital to cater to a mix of channels (omnichannel), particularly as B2B buyers detach from traditional high-touch sales processes and look to order through self-service.
In all cases, to be an effective B2B manufacturing company, you’ve got to keep one eye on market trends and product demand and another on production. Businesses that innovate through digital transformation are best placed to meet market demands and offer the customized, complex products that buyers demand.
B2B Manufacturing FAQs
What is an example of a B2B company?
Salesforce is a prominent example of a B2B company. It provides customer relationship management (CRM) software and related applications that cater to other businesses.
B2B companies span the full spectrum of industries, from digital services to heavy industrial manufacturing. In terms of B2B manufacturing businesses, semiconductor makers like Nvidia are leading examples of high-tech industrial manufacturers.
What is the meaning of B2B production?
B2B production refers to manufacturing products or services specifically designed for other businesses.
This type of production focuses on creating goods that other companies use in their operations, incorporate into their products, or offer for resale.
The key characteristic of B2B production is that its end users are businesses, not end consumers. Industrial companies selling high-tech goods, heavy machinery, or raw materials are typically B2B. Key decision-makers will survey product information in greater detail, and purchase values are often much higher than in B2C.
Is manufacturing B2B or B2C?
The manufacturing industry can be categorized as both B2B and B2C, depending on the end users of the products. B2B manufacturing involves producing goods sold to other businesses.
In contrast, B2C (business-to-consumer) or D2C (direct-to-consumer) manufacturing targets the production of goods intended for direct purchase and use by individual consumers. Think of brands like Casper, Glossier, and Warby Parker.
How do B2B and B2C markets differ?
B2B markets are where businesses transact with other companies. These markets are characterized by longer sales cycles, larger transaction values, and a focus on developing long-term relationships.
On the other hand, B2C markets target individual consumers with a wide range of buyer personas. These consumers often make quicker purchase decisions, have smaller transaction sizes, and place a greater focus on branding.
A B2B transaction will often involve more steps than a B2C one. B2B clients’ experiences also often involve deeper engagement with sales teams.
However, there is a crossover between B2B and B2C. For example, B2B companies increasingly use eCommerce, generally associated with B2C, to reach buyers.
What is the role of supply chain management in B2B?
In B2B commerce, supply chain management is critical in coordinating the flow of goods, services, and information from suppliers to business customers. A manufacturing company handles the manufacture of goods to be passed on downstream in the supply chain.
It involves managing logistics, ensuring timely product delivery, maintaining cost efficiency, and upholding quality standards. Effective supply chain management is vital for operational success in B2B companies.
What is the impact of B2B digital marketing?
Digital marketing in the B2B sector involves using online strategies to reach and engage potential customers. This is particularly true in eCommerce and digital sales, where marketing automation becomes a priority.
B2B marketing efforts involve implementing a content marketing strategy, search engine optimization (SEO), email marketing, and social media, all tailored to influence decision-makers within other businesses.
Digital marketing is crucial in B2B for generating leads and prospects, building brand awareness, refining the sales funnel, and establishing a company as a thought leader.