Is it Time for B2B Freight Providers to Learn From B2C?

You know how we often think of shipping as just trucks on the highway? Well, B2B freight is actually much more complex than that. We’ll walk you through the key pieces of this logistics puzzle.

When you’re moving goods between businesses, you’ve got several options in your toolkit. Think of it like choosing the right tool for the right job:

• Road Transport (Trucking): This is your most flexible option. You’ll see everything from box trucks handling local deliveries to massive semi-trucks moving goods across the country. We’ve watched the trucking industry evolve tremendously over the years, and it’s still the backbone of most B2B freight operations.
• Rail Transport: When you need to move heavy loads over long distances, rail becomes your best friend. We’ve seen companies save significant money by using rail for bulk materials like grain, coal, or manufactured goods. It’s slower than trucking but incredibly efficient for large volumes.
• Ocean Freight: This is your global connector. Whether you’re bringing in raw materials from overseas or shipping finished products to international markets, ocean freight handles the heavy lifting of international trade. You’ll typically see this integrated with other transport modes as part of a longer supply chain.
• Air Freight: Think of this as your premium express option. Whilst it’s the most expensive, it’s crucial when time is of the essence. We’ve seen companies use air freight during emergencies or for high-value, time-sensitive goods.

Types of Shipments

In B2B freight, size really does matter. Here’s how we break it down:

• Full-Truckload (FTL): This is when you’ve got enough goods to fill an entire truck. It’s typically more cost-effective per unit and provides faster transit times since the truck goes directly to its destination.
• Less-Than-Truckload (LTL): This is where your shipment shares space with other companies’ freight. It’s more economical for smaller shipments, but requires more coordination and typically has longer transit times.
• Parcel: These are your smaller shipments, usually under 150 pounds. Whilst we often think of parcel as B2C, many businesses use parcel services for small, urgent B2B deliveries.

Documentation and Compliance

Here’s where things get interesting — and sometimes complicated. Every B2B shipment needs:

• Bills of Lading (BOL): Think of these as your shipment’s passport.
• Commercial Invoices: Essential for tracking the value and contents.
• Customs Documentation: Critical for international shipments.
• Safety Compliance Records: Especially important for hazardous materials.

The B2B vs B2C Freight Difference

Now, we’ll explain why B2B freight is so different from the packages you get at home. The main differences we’ve observed over the years include:

• Scale and Volume: Whilst B2C typically handles individual packages, B2B often deals with pallets, containers, or entire truckloads. We’ve seen single B2B shipments that would fill thousands of B2C packages.
• Delivery Locations: B2C deliveries usually go to residential addresses with standard delivery hours. B2B freight, however, involves complex delivery schedules to warehouses, manufacturing plants, and distribution centres, often with specific delivery windows and appointment requirements.
• Service Expectations: In B2C, customers expect fast delivery with real-time tracking. B2B freight focuses more on reliability and consistency — it’s less about speed and more about predictability. We’ve found that B2B customers often prefer a reliable weekly delivery schedule over faster but inconsistent service.
• Pricing Structure: Remember those simple shipping options you see when shopping online? B2B freight pricing is much more complex, involving factors like volume commitments, lane pricing, fuel surcharges, accessorial charges, and freight contract negotiation.
• Relationship Dynamics: B2C shipping is typically transactional, whilst B2B freight often involves long-term partnerships. We’ve seen B2B relationships last decades, with freight providers becoming essential partners in their customers’ supply chains.

Should B2B Freight Providers Offer B2C-Style Shipping Rates?

In our various articles covering the topic of cost-to-serve, we’ve often mentioned the importance of segregating customers into tiers, with the gold standard of service reserved for the most profitable customers, and progressively lower levels for those in the middle and bottom echelons of profitability.

After all, if your business has customers that provide you with a minimal profit margin once you take the cost of serving them into account, the last thing you want to do is erode that margin even further.

That’s just what happens, though, when you provide them with the same service standard as your most profitable customers receive — yet it’s a practice that B2B logistics providers often follow, especially when it comes to factoring freight costs into pricing agreements.

Tiered Freight Pricing in B2C Markets

The last time you ordered a product online as a consumer, did you find a choice of shipping options on offer? The likelihood is that you did. In consumer ecommerce, it’s common for retailers to offer free shipping as standard, with lead times of three days or more; faster shipping at a small premium, with a delivery promise of two to three days; and next-day or even same-day deliveries available for customers who care more about speed than cost.

If you’re wondering why retailers structure their pricing in this way, it’s primarily to ensure a customer experience that’s as personalised as possible. For example, some consumers will want to save money above all else, either generally or in a specific shopping scenario.

They are the ones who won’t mind waiting a few days to receive their purchases, as long as the price is right. Others want to receive their goods as early as possible, and don’t care too much about paying a premium for next-day or same-day delivery.

Again, it may be that they make a specific purchase which, for one reason or another, they need to receive quickly (perhaps a birthday gift remembered at the last minute?). However, an increasing number of online shoppers have come to expect an experience that’s as close to shopping in a traditional store as possible, meaning they don’t want to wait for delivery — ever.

The third category of shopper sits somewhere in the middle, and whilst not wanting to wait several days to receive her purchases, is averse to paying a high delivery charge. This type of customer will hence settle for paying a moderate fee to receive her purchases within three days.

Of course, the tiers might be structured differently to those suggested above, and as time goes on, retailers and their freight providers are coming up with ever more inventive ways to differentiate their fulfilment service offerings. However, the principle of good, better, best typically applies to retail shipping structures, regardless of how tiers are organised and how many options are offered.

The Complex World of B2B Freight Pricing

In the business-to-business world, freight pricing tends to be complicated, with a range of factors affecting the rates offered by providers. Pricing calculations can be based on:

• Distance travelled
• Trucking lanes used
• Market capacity
• Seasonality
• Shipper flexibility and required delivery day/time
• Fuel surcharges

The above elements are for full-truckload shipping (FTL). Pricing gets even more convoluted for less-than-truckload shipments, as weight, volume, density, and several other cargo-related factors join the equation.

Then there is the fact that B2B freight providers are deeply embedded in a sales culture based on solid customer relationships. Every B2B customer expects to be able to negotiate freight rates, with outcomes tailored to the needs of the business.

That’s an entirely different environment to consumer retail, where business is more transactional than in B2B. Consumers want to know, pretty much at a glance, what type of delivery services are available and how much they will cost.

One Size Does Not Fit All

Despite the issues mentioned above, we still find it surprising that companies running in-house fulfilment operations seem determined to stick to a one-size-fits-all approach to freight pricing. Of course, in many cases, vendors factor freight costs into product pricing, so customers don’t get to see what proportion of their remittance covers the cost of transportation.

Nevertheless, a blanket policy for B2B freight transportation often introduces problems into a company’s fulfilment process. We already mentioned the cost-to-serve issue, but in reality, there is a broader range of concerns to consider.

The Problem of Fixed Delivery Days

Let’s take the example of a company that allocates fixed delivery days to specific geographical areas. What tends to happen is that over time, some days fill up with work to the point of saturation, whilst on other days, the workload declines to the point where vehicles sit idle in the transport yard.

Not only that, but expedited deliveries can quickly become a problem in this type of operation.

Customers’ businesses are unpredictable, and when trade picks up, nobody wants to find themselves short of inventory because they didn’t order enough. When that happens, the first reaction is to contact the supplier and place an emergency order. What happens then is that these emergency orders must be integrated with the scheduled deliveries, leading to routing inefficiencies and an even more significant imbalance of work across the week.

Could Freight Providers Benefit from Good, Better, Best?

It’s conceivable that a tiered pricing structure for freight transportation could benefit B2B providers in several ways. Firstly, it could help to improve cost-to-serve.

For instance, if your company has customers that regularly place “emergency” orders for delivery, you could offer them the option of free delivery on the next day that you typically serve their locality.

If that day is several days away, you could offer a next-day service for a premium, or a same-day, express-delivery option at a cost that makes it worthwhile for your business and provides the customer with an ultra-rapid response.

Whilst this approach won’t reduce the cost of serving those customers, it will help to improve margins, discourage unreasonable requests for emergency deliveries, and ensure a fast resolution for customers with genuinely urgent needs.

Can Tiered Freight Pricing Smooth Demand?

It might also be possible to apply the good, better, best approach more generally, perhaps as an alternative to using fixed delivery days.

B2B vendors could allow customers to opt for free deliveries with a longer lead time, faster deliveries for a modest shipping fee, and next-day deliveries at a higher price. Such an approach could contribute to a smoother demand profile and make sales more profitable.

Of course, given the pricing complexity mentioned earlier in this article, it may not be possible to introduce a simple tiered service in the B2C style, but the principle could perhaps be applied to freight tariffs, creating similar opportunities for demand-smoothing and profitability.