B2B Shipping: How It's Different from B2C

If you've only ever shipped individual packages to consumers, your first B2B shipment will feel like stepping into a parallel universe. Instead of a 2 lb box going to someone's front porch, you're sending a 600 lb pallet to a warehouse loading dock that's only open from 7 AM to 2 PM. The receiving company wants you to schedule a delivery appointment 48 hours in advance, use their specific carrier, follow their routing guide, and include a packing slip with their PO number. If you miss any of these requirements, they'll charge you a $250 compliance fee.

Welcome to B2B shipping. It's more complicated, but the order values are bigger, and the relationships last longer.

The Fundamental Differences

In B2C shipping, you deal primarily with small packages, often no more than 50 lbs, sent to residential addresses. The process is straightforward: you package the item, attach a shipping label, and send it off with a carrier like USPS, FedEx, or UPS. Delivery is typically to the customer's doorstep, and payment is received at the time of order.

B2B shipping, however, involves larger, heavier shipments, often ranging from 100 to 10,000 lbs. These shipments are usually sent to commercial locations like warehouses, retail stores, or loading docks. The delivery process is more complex, often requiring scheduled appointments and specialized carriers such as LTL (Less Than Truckload) or FTL (Full Truckload) freight. Packaging is also more robust, involving pallets and stretch wrap, accompanied by detailed bills of lading.

Payment terms in B2B can vary significantly, with net-30, net-60, or even net-90 terms being common. This means payment is received long after the goods have been shipped, impacting cash flow. Returns are more complex as well, usually involving an RMA process, freight return, and potential restocking fees. Compliance with customer-specific routing guides and labeling requirements is crucial to avoid hefty chargebacks.

LTL Freight: The Workhorse of B2B

LTL, or Less Than Truckload freight, is the go-to option for many B2B shipments. It's cost-effective for medium-sized loads because multiple shippers share the truck space, thus sharing the cost of the shipment.

When to Use LTL vs. Parcel vs. FTL

For shipments under 150 lbs, parcel services like FedEx and UPS are typically cheaper and simpler. For shipments between 150 and 5,000 lbs, LTL freight becomes more economical. It allows you to pay only for the portion of the truck your shipment occupies. For shipments over 5,000 lbs, partial truckload services can sometimes offer better rates than LTL, particularly when the shipment is close to the size of a full truckload. If your shipment exceeds 10,000 lbs or involves ten or more pallets, FTL is usually the best option, providing a dedicated truck with the best rate per pound.

LTL Freight Carriers

Several carriers dominate the LTL freight industry, each with its unique strengths. FedEx Freight is known for its reliability and premium pricing. XPO Logistics offers a large network and innovative technology solutions. Old Dominion is noted for having the best claims ratio in the industry, making it a safe bet for delicate or high-value shipments. Other notable carriers include Estes Express, Saia, ABF Freight, and R+L Carriers, each offering competitive pricing and strong regional coverage.

LTL Pricing: Freight Class Matters

Freight class is a crucial factor in LTL pricing. This classification, determined by the National Motor Freight Traffic Association (NMFTA), ranges from 50 to 500, with class 50 being the cheapest and class 500 the most expensive. The class is based on the shipment's density, stowability, handling, and liability.

Misclassifying your freight class can lead to costly reclassification fees. Carriers will verify the shipment's weight and dimensions, and if these don't match your declared class, they will adjust the price upwards. Precise classification helps avoid these surprises and ensures fair pricing.

The Bill of Lading (BOL)

The Bill of Lading (BOL) is a fundamental document in B2B shipping. It acts as a receipt and a contract between you and the carrier. It must include key information such as the shipper and consignee details, PO number, number of units, weight, freight class, description of goods, and any special instructions like liftgate requirements or delivery appointments. Ensuring the BOL is accurate and complete prevents delays and disputes.

Routing Guides: Following the Customer's Rules

Many large retailers and businesses have routing guides that dictate how vendors must ship to them. These guides specify the carrier to use, labeling and packing requirements, delivery windows, and necessary documentation.

Typical Routing Guide Requirements

For example, a routing guide might mandate the use of a specific carrier like XPO Logistics for all LTL shipments or require GS1-128 labels on each carton with an Advance Ship Notice (ASN) transmitted via EDI 856. They may also set limits on carton weight and specify pallet sizes. Adhering to these requirements is essential to avoid chargebacks, which can range from $50 to several hundred dollars per violation.

Chargebacks for Non-Compliance

Failing to comply with a routing guide can significantly impact your bottom line. Chargebacks for using the wrong carrier, missing ASNs, incorrect labeling, or delivering outside the specified window can quickly add up, turning a profitable order into a loss. For small vendors, avoiding these chargebacks is crucial to maintaining profitability.

Packaging for B2B: Pallets, Stretch Wrap, and More

Proper packaging is critical in B2B shipping. The standard GMA pallet, measuring 48" x 40", is widely used in the US and fits perfectly in truck trailers. Other pallet sizes like ISO, half, and quarter pallets are used for international shipping or specific display quantities.

Pallet Building Best Practices

When building pallets, adhere to best practices to ensure safe and efficient transport. Stack no higher than 48 inches to fit within trailer limits and keep the weight under 2,500 lbs for safe handling by forklifts. Use column stacking for stability, and apply stretch wrap with 3-5 rotations to secure the load. Corner boards can help prevent strap damage and stabilize the load, while ensuring no overhang beyond the pallet edges prevents damage and additional fees.

Payment Terms in B2B

B2C transactions are straightforward, with payment received before shipping. In B2B, payment terms like net-30, net-60, or even net-90 are common. These terms allow buyers to pay after receiving goods, which can strain your cash flow.

Common Payment Terms

Net-30 is standard and manageable, while net-60 and net-90 can pose significant cash flow risks. Offering a 2/10 Net-30 term, where the buyer receives a 2% discount for paying within 10 days, can incentivize faster payments. Cash on delivery (COD) and prepaid terms are rare but preferable for maintaining positive cash flow.

Freight Payment: Who Pays?

Freight payment terms are determined by Incoterms, which dictate who pays for freight and who bears the risk. FOB Origin means the buyer pays the freight and bears the risk from pickup. FOB Destination is more seller-friendly, as the seller bears the risk until delivery. Prepaid terms have the seller pay the freight, possibly billing back the buyer, while collect terms have the buyer pay the carrier directly.

EDI: The Language of B2B Commerce

EDI, or Electronic Data Interchange, is essential for communicating order and shipping data electronically with major retailers. Common EDI transaction sets include the 810 Invoice, 850 Purchase Order, 856 Advance Ship Notice, 855 PO Acknowledgment, and 820 Payment Order.

EDI Options

Several EDI solutions are available, catering to different business sizes and needs. SPS Commerce and TrueCommerce are popular choices for small to mid-sized B2B sellers, offering services at a monthly cost. Built-in ERP integration is ideal for businesses already using systems like NetSuite or SAP. For very small B2B operations with limited retail accounts, managing transactions manually without EDI might suffice.

Returns and Claims in B2B

B2B returns involve a more complex process than B2C. There's no simple prepaid return label; instead, the process usually involves issuing an RMA (Return Merchandise Authorization) number, coordinating freight returns, and potentially charging restocking fees.

The RMA Process

The RMA process begins when the customer contacts you with a defect or issue report. You then issue an RMA number, and the customer ships the product back, often at their expense, unless you arrange freight pickup. Upon receiving and inspecting the returned goods, you decide whether to issue a credit, send a replacement, or deny the claim.

Freight Claims

Freight claims for damaged shipments also differ from parcel claims. It's crucial to note any damage on the delivery receipt at the time of delivery. This should be done before signing for the shipment. If damage is discovered later, winning a claim becomes significantly more challenging. After noting the damage, file a claim with the carrier within 30 days, ideally sooner. Provide thorough documentation, including photos, the BOL, invoice, and damage report. The carrier's investigation can take 30 to 120 days, after which they will settle, deny, or negotiate the claim.

Getting Started with B2B Shipping

If you're transitioning from B2C to B2B shipping, consider these initial steps:

Get a freight quote platform: Use platforms like Freightquote.com, uShip, or GoShip to obtain LTL rates.

Learn your freight class: Utilize the NMFC classification guide or seek advice from your 3PL.

Set up proper invoicing: Ensure invoices include PO numbers, payment terms, and accurate ship-to addresses.

Invest in a pallet jack: A pallet jack, costing $200-$300, is essential for loading and receiving shipments.

Read your customer's routing guide cover to cover: Compliance with these guides saves money and prevents chargebacks.

B2B shipping has a steeper learning curve than B2C. However, the larger orders, stronger relationships, and more predictable revenue make it a worthwhile venture. Once you master LTL freight and routing guides, you'll appreciate the benefits of B2B shipping over smaller, less predictable B2C orders.