B2B Manufacturing

What is B2B Manufacturing?

Business-to-business (B2B) manufacturing describes the process of producing goods in bulk for other companies. The companies that purchase B2B-manufactured products are not the end-users—they are the vendors and B2B manufacturers are known as the suppliers.

Most companies outsource their manufacturing to a supplier. There are several reasons to do so:

• Operational efficiency. B2B manufacturers already have large warehouses, factories, and supply chain infrastructure in place. By outsourcing their production to B2B manufacturers, companies can save time and money that would otherwise be spent on building these systems from scratch.
• Scalability. These warehouses and factories are equipped to handle high output volumes, allowing businesses to increase or decrease production in response to demand.
• Cost savings. Between transportation costs, building rent, equipment, raw material prices, and labor costs, starting and operating a production facility is prohibitively expensive. Companies save money by relying on B2B manufacturers for their production needs while focusing their efforts on revenue generation.
• Quality assurance. A reputable B2B manufacturer has likely been producing similar items for years and thus deeply understands the process.

A B2B manufacturer’s customers can be other B2B businesses, or they can be B2C (business-to-consumer) companies.

For example, a B2B clothing manufacturer and screenprinter might produce bulk t-shirts, sweaters, and jackets for multiple brands and individual sellers. These businesses may sell them directly to their consumers or pass them off to another business (such as a department store) for further processing or retail.

Synonym

• Business-to-business manufacturing: The long-form term for B2B manufacturing, which is used interchangeably.

B2B Manufacturing Challenges

Since B2B manufacturers deal with other businesses rather than individual customers, their business models and buying process are completely different.

This creates numerous unique challenges, most of which revolve around shifting customer preferences, digital transformation, and rapidly evolving sales cycles.

1. Vendors and distributors increasingly want self-service.

Although the majority of B2B companies preferred self-service before the global COVID-19 pandemic, 2020 marked a significant point of inflection for self-service in the B2B customer experience.

At the pandemic’s peak, McKinsey conducted a study and learned that 99% of B2B buyers were comfortably using end-to-end online self-service, even for transactions of over $50,000.

What this means for sales teams and customer engagement is there is no longer a need (or want) for sales reps to be the intermediaries for order fulfillment.

2. Product complexity makes imagining a better buying and selling experience difficult.

The fact that reps are no longer needed for order placement, status, and fulfillment is an advantage—customers don’t want to have these conversations, and reps can use that time to prospect, engage new potential customers, and build meaningful relationships.

But understanding what B2B customers want and creating a way to deliver that to them are vastly different concepts.

On the surface, the answer is simple: Create a buying portal that supports B2B ecommerce for manufacturers.

But there is an immense web of complexity for B2B manufacturers to untangle, including product customization, order scheduling, and customer segmentation.

For B2B manufacturers, the importance of the overall experience is twofold:

• Buying experience: Buyers need the resources to configure products and determine potential pricing on their own. They only spend about 5% of their purchase journey with any one company’s sales team, meaning resources on the manufacturer’s website must be as clear and extensive as possible.
• Selling experience: The portal must gather and centralize the right customer data to help sellers maximize their limited time with their prospects. Inefficient processes lead to dissatisfied employees, lower revenue growth, and missed sales opportunities.

Developing a portal that meets the demands of both buyers and sellers is considerably difficult, especially if a company has limited IT resources.

3. Lead generation is less straightforward in the manufacturing industry.

Generating B2B leads for manufacturing isn’t as simple as making a few cold calls. And marketing efforts for B2B lead gen certainly don’t elicit a direct response.

An industrial buyer has considerably different needs from a consumer buyer and requires an equally different approach.

Today, B2B manufacturers approach lead generation by leveraging targeted content marketing, industry-specific SEO strategies, and participation in industry forums and events. It is only after a customer shows significant interest that a sales rep is typically introduced to the equation.

For sales management teams at B2B manufacturing firms, this begs the question: “Where do our sales reps fit into the sales process, and how are they best utilized throughout the sales funnel?”

4. Supply chain threats are constant.

Global supply chain transactions account for 76% of world trade. At any given time, B2B manufacturers manage hundreds of orders, often with tight timeframes and margins.

When a manufacturing company faces sudden changes in customer demand or supply constraints, its sales reps must become resilient problem-solvers to find solutions that work for both the buyer and the seller.

Here are three examples of supply chain problems that have historically impacted B2B manufacturers:

• Raw material shortages. A shortage of raw materials can significantly disrupt the manufacturing process. This can be due to various reasons, such as geopolitical tensions, natural disasters, or supplier insolvency. In March 2022, for instance, nickel prices reached over $100,000 per tonne for the first time due to conflict in Ukraine. Nickel is required for producing stainless steel and electric vehicles, putting strain on B2B manufacturers across dozens of industries.
• Trade tariffs and regulations. Changes in trade policies and regulations can also pose significant challenges. When the US introduced new tarriffs on imported steel and aluminum in 2018, it increased costs for domestic manufacturers who relied on these materials, forcing them to adjust their pricing or sourcing strategies.
• Pandemic-related disruptions. Lockdowns and restrictions led to factory shutdowns, labor shortages, and transportation delays, disrupting production schedules, increasing costs, and delaying deliveries. These disruptions compelled manufacturers to reassess their supply chain strategies and consider measures such as diversifying suppliers or increasing inventory levels.

What Makes B2B Manufacturing Different?

Every element of B2B manufacturing is different from B2C manufacturing and direct-to-consumer (DTC) sales.

B2B Manufacturing Buyers

B2B buyers are usually organizations with specific needs that are vastly different from individual consumers. They often require customized solutions, have a longer buying decision process involving 6 to 10 decision-makers, and emphasize value over cost.

Their purchase decisions are based on the needs of their organization, demanding a deep understanding of their industry, business challenges, and operational requirements. The scale of B2B transactions is also often larger, involving substantial order volumes and long-term contracts.

Still, 80% of B2B buyers now expect the same customer experience as B2C customers, meaning they want immediate responses, personalized experiences, and transparency.

B2B Manufacturing Marketing

Expertise sells in B2B manufacturing marketing. A solution-oriented approach to content marketing (i.e., one that consists of white papers, case studies, and actionable information) is essential, as B2B buyers are looking for a partner that can provide comprehensive guidance in navigating their industry.

Each content piece acts as a touchpoint for the manufacturer’s target markets, but doubles as a sales enablement tool.

Customers in the “awareness” stage of the funnel can read published educational content and product demos.

Meanwhile, sales reps can use product videos and webinars to explain how products work in practical scenarios, while demos allow them to present the features and benefits of their solutions.

In terms of SEO, content should aim to answer specific questions B2B customers are asking—not search volume, per se. High-converting content that garners a small amount of targeted traffic results in higher ROI compared to content that ranks higher but is of lower relevance.

B2B Manufacturing Sales

In 2022, U.S. manufacturers and distributors increased their total B2B sales to $14.89 billion—a 15.4% increase from $12.98 billion in 2021.

Sellers in the manufacturing industry owe this significant growth to digital sales transformation. For B2B manufacturing sellers, digital transformation includes:

• Implementing new sales technology, such as headless commerce and AI
• Digitizing sales processes to enable remote selling/buying
• Extending sales channels through omnichannel experiences
• Social selling on LinkedIn
• Prioritizing an ecommerce experience over traditional sales methodologies
• Integrating an app-like configurator for complex products into their website

By switching to digital solutions and selling through online channels, sales reps have increasingly been able to meet buyers where they are and guide them toward a purchase decision more effectively.

B2B Manufacturing Distribution Models

There are several distribution models that fall under the “B2B manufacturing” umbrella. They each serve different purposes, and some are better suited to certain industries than others.

Wholesale Manufacturing Distribution Model

The wholesale manufacturing distribution model involves the sale of goods in large quantities to a wholesaler, who then sells the products to retailers or directly to the end customers.

In this model, the manufacturer can focus on production while the wholesaler takes responsibility for storing, transporting, and selling the products.

Manufacturers choose the wholesale model for several reasons:

• It broadens market reach without extensive sales infrastructure. Wholesalers typically have established relationships with a network of retailers, allowing manufacturers to distribute their products widely with a single transaction and offloading sales and marketing work to the distributor.
• It allows manufacturers to focus on their core competency—producing goods—while wholesalers handle the logistics of storage, transportation, and retail sales. This division of labor can lead to increased efficiency and cost savings.
• Selling in large quantities to wholesalers stabilizes demand, simplifying production planning and reducing the risk of overproduction.

This model is particularly beneficial for manufacturers who produce goods in large quantities or whose product catalog is sold in a wide variety of retail outlets, such as clothing, toys, and appliances.

It’s also suitable for manufacturers who prefer not to engage directly in retail sales or logistics management.

Dropshipping Manufacturing Distribution Model

The rise of Amazon and eBay brought about dropshipping: a newer, easier way to move goods from manufacturers to buyers. Now, 1 in every 3 retailers uses dropping as a fulfillment strategy.

Under the dropshipping model, a product’s seller (the dropshipper) doesn’t own any inventory. Instead, they enlist a third-party supplier (third-party logistics, or 3PL) to warehouse, package, and ship items directly to customers.

This model is convenient for manufacturers because it eliminates the need to store and manage inventory; they simply produce the goods and dispatch them when orders are placed.

It’s also highly cost-effective as dropship suppliers typically charge a flat fee or percentage per item, meaning manufacturers don’t have to invest in infrastructure, staff, and other overhead costs associated with running a warehouse.

Since dropshipping has low entry barriers and offers significant benefits for prospective ecommerce sellers, manufacturers using this model can charge higher per-unit costs than they would had the seller purchased the product in bulk.

Dropshipping can also be used to test products and gauge interest in a particular market before investing in full-scale production.

Vendor Managed (VMI) Manufacturing Distribution Model

In a VMI arrangement, the manufacturer is responsible for maintaining an agreed-upon inventory level at the customer’s location. This involves real-time monitoring of inventory levels, product forecasting, and replenishing stock as needed.

The manufacturer can see the customer’s inventory data and decide when to restock to avoid stockouts or overstocking.

The VMI model is particularly suitable for industries with predictable and consistent product demand, such as the grocery or automotive parts sectors.

It’s also beneficial for products with short shelf lives, where timely replenishment is crucial.

B2B Ecommerce Platform Manufacturing Distribution Model

The B2B Ecommerce Platform distribution model represents a significant evolution in the way manufacturers reach their customers. It involves selling products directly to business customers through online platforms.

Most B2B manufacturers at least partially use these platforms, even if they don’t base their whole business model around them.

Common examples of B2B ecommerce platforms for manufacturers include:

• Amazon Business: A marketplace for businesses to buy and sell products at wholesale prices.
• Alibaba: A global ecommerce platform that connects manufacturers, wholesalers, and distributors with buyers from around the world.
• Shopify Plus: A comprehensive ecommerce platform tailored to enterprise B2B businesses.
• Oberlo: A dropshipping platform designed to make it easier for merchants to run their stores without stocking or shipping products.

Unlike traditional models, this model allows manufacturers to engage with customers directly, fostering deeper relationships and often leading to higher sales.

B2B ecommerce platforms provide access to data-driven insights that can help manufacturers better understand customer needs and preferences. That way, they can tailor their products or services more precisely and offer unique value propositions that stand out.

Most importantly, these platforms provide access to larger networks of potential buyers, eliminating geographical restrictions and opening up new market opportunities.

Private Labeling

Private labeling is a distribution model in which a manufacturer produces goods to be marketed and sold under a retailer’s brand name.

In this arrangement, the manufacturer handles the production, while the retailer focuses on marketing and sales, bringing the product directly to their customers under their own brand.

Private labeling particularly benefits manufacturers that excel at producing high-quality products but may not have the resources or desire to invest in extensive branding and marketing efforts.

It also works well for retailers that have dominated a significant part of their market and want to manufacture products for others as an additional revenue stream.

Common examples include electronics, designer fashion, and health & beauty products.

Reciprocal Trading Agreements

A reciprocal trading agreement is an arrangement between multiple partners in the supply chain to mutually exchange goods and services at a set price.

For example, one partner may offer products from its inventory in exchange for discounted prices on those of another partner.

Common examples of reciprocal trading agreements include:

• Cross-docking: An arrangement between two or more partners in the supply chain to exchange goods without storage.
• Vendor Managed Inventory (VMI): An agreement wherein a manufacturer agrees to manage inventory for its partner and keep it at an agreed-upon level.
• Joint purchasing and distribution networks: A collective effort between multiple partners in the supply chain to purchase, stock, and distribute goods.

Reciprocal trading agreements provide significant benefits to both manufacturers and retailers.

They allow suppliers to reduce costs and increase efficiency by eliminating middlemen and streamlining operations.

On the retailer side, they enable faster delivery times, better customer service, and competitive pricing.

The Importance of Operational Efficiency in B2B Manufacturing

Operational efficiency in B2B manufacturing is no longer a luxury—it’s a necessity.

The competitive landscape has shifted dramatically in recent years, mainly driven by the advent of digital technologies and changing customer expectations.

This shift has been further accelerated by the “Amazon Effect“—i.e., the heightened consumer expectations for fast, efficient service, seamless purchasing experiences, and impeccable customer support set by giants like Amazon.

Manufacturers are feeling the pressure of this effect, as their B2B buyers now expect the same level of efficiency and customer-centric experiences they must now provide to their own customers.

If manufacturers fail to deliver, they risk losing out to competitors who can meet these heightened expectations.

How B2B Manufacturers Can Differentiate Themselves From the Competition

There are four primary ways B2B manufacturers differentiate themselves: product, vertical, horizontal, and mixed differentiation.

Product Differentiation

Product differentiation entails creating a competitive advantage through product innovation. To create a differentiated product, manufacturers must invest heavily in product discovery and development, incorporating the latest technologies and market insights into their offerings.

In B2B manufacturing, product differentiation could also involve customization, allowing clients to tailor products to their specific needs. However, it’s important to ensure that these unique attributes are meaningful to customers and offer genuine added value.

Vertical Differentiation

Vertical differentiation involves distinguishing a company based on the level of service or the quality of product offered.

For instance, a B2B manufacturer might position itself as a premium provider by offering high-quality products, exceptional customer service, or value-added services such as comprehensive post-sale support or consultancy.

This strategy often requires a commitment to continuous improvement and a customer-centric approach.

Horizontal Differentiation

Horizontal differentiation involves differentiating a company by its market presence and competitive pricing.

To achieve this, manufacturers must create relationships with partners in the supply chain who can provide cost savings or better delivery times.

Manufacturers can also differentiate themselves through digital technologies such as automation, analytics, and artificial intelligence to streamline operations and become more agile and responsive to customer needs.

Mixed Differentiation

Mixed differentiation is a hybrid strategy that combines elements of product, vertical, and horizontal differentiation.

It’s all about creating a unique blend of product attributes, service levels, and other features that appeal to a specific market segment.

This could involve offering a high-quality, customizable product with exceptional service and a strong emphasis on sustainability.

Mixed differentiation can be particularly effective but requires a deep understanding of the target market and a coordinated approach across all aspects of the business.

Manufacturing B2B Operations Solutions

To drive companywide efficiency, organizations need to adopt process automation, data centralization, and advanced analytics. That way, they can produce more value without increasing costs and resources.

Product Information Management (PIM)

Product Information Management (PIM) is a dynamic tool with the primary function of centralizing, managing, and disseminating product data across various channels, ensuring that consistent and accurate information is provided.

In a fast-paced, multi-channel business environment, PIM has become more than just a repository for product data—it acts as a comprehensive platform that significantly enhances the ecommerce product experience for distributors and end customers.

B2B Sales Enablement Technology

In the complex world of B2B sales, having the right technology to streamline and manage the sales process is essential.

Sales enablement technology plays an integral role in improving sales productivity, providing sales reps with the tools and resources they need to engage the right buyers, close deals faster, and drive more revenue.

CRM

Customer relationship management (CRM) software is the cornerstone of sales enablement technology. It serves as a central repository for customer and prospect information, integrating seamlessly with ERP systems to synchronize product and customer data.

The ability to track B2B deals and monitor their progress through the sales pipeline is a core feature of CRM platforms. They provide invaluable insights into customer behavior, allowing sales teams to strategize effectively, anticipate customer needs, and, ultimately, drive sales performance.

CPQ

CPQ software offers significant advantages for manufacturers selling to B2B customers.

• Drives quote-to-cash (QTC) efficiency. The median B2B sales cycle length is 2.1 months. By streamlining the QTC process, CPQ can reduce drop-outs and boost revenue.
• Simplifies complex product configurations. B2B manufacturing entails complexity. Whether it’s custom-designed products or varying order volumes from buyer to buyer, CPQ can handle it all.
• Supports self-service initiatives. Online product configurators allow customers to define their requirements before engaging with sales.
• Expedites order fulfillment. CPQ solutions provide visibility into inventory levels and keep stock up-to-date ensuring that once a deal is closed, the order is processed efficiently and accurately.

DealRoom

DealRoom is a sales engagement platform designed to manage the complexity of B2B transactions.

Given the multiple decision-makers involved in B2B sales—product developers, marketers, C-suite, and more—maintaining effective communication and collaboration is paramount.

DealRoom facilitates this by providing a unified platform for document sharing, team communication, and contract negotiation, ensuring that all relevant information and discussions are centralized, accessible, and secure.

This accelerates the sales cycle, reduces miscommunication, and drives successful deal closures.

Billing Software for B2B Manufacturing

In the B2B manufacturing sector, transactions involve numerous variables, from customized product specifications and quantity to different shipping methods and payment terms.

To manage this complexity, billing software must be robust and flexible. It should be capable of handling a range of billing scenarios, from one-time product purchases to recurring service contracts, all while ensuring accurate tax calculations, revenue recognition, and compliance with various financial regulations.

Given the near-complete shift to ecommerce sales, billing software must also be seamlessly integrated with website platforms and payment gateways.

That way, buyers to purchase products electronically, streamlining the buying process while simultaneously providing a higher level of convenience and security.

Revenue Operations Platforms

RevOps teams are responsible for aligning sales, marketing, and customer success efforts to drive efficient revenue growth, and these platforms provide the tools necessary to do just that.

In the context of marketing, B2B manufacturers typically deal with large transaction values and prolonged sales cycles that entail multiple customer touchpoints.

Revenue operations platforms aid in coordinating marketing initiatives, ensuring the right messages reach the right prospects at the right time. They provide a holistic view of the customer journey, helping marketers create personalized, engaging experiences that nurture leads and convert them into customers.

On the sales side, The goal is to optimize the productivity of sales representatives, minimizing the cost per lead or sale while maximizing the volume of leads and sales.

A RevOps platform provides valuable analytics and insights that help refine sales processes, train sales reps more effectively, and ultimately, drive higher conversion rates.

From a product manufacturing standpoint, a RevOps platform integrates with ERP and B2B ecommerce systems to offer essential insights into production operations and supply chain health. Revenue operations teams can use these insights to improve company margins—i.e., generating more revenue without the need for higher sales volumes.

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