To build or to buy logistics software: How to decide
JUN. 24, 2024
For common functions, off-the-shelf makes sense. But when software touches your core value proposition, the equation changes.
Speed is the name of the game in modern logistics. Competition is fierce: two-day deliveries are the norm, supply chains are more complex than ever, and every millisecond counts.
CIOs are turning to logistics software to keep up, but find themselves wrestling with an age-old question — should I buy a pre-packaged solution, or have one custom built?
It’s a nuanced choice that depends on your company’s maturity level and goals. Learn how to avoid common pitfalls and evaluate the total cost of ownership (TCO) to make the best decision for your business.
Off-the-shelf versus custom logistics software: How they compare
Gaining a competitive edge
For common corporate functions like accounting, finance, and HR, off-the-shelf software makes a lot of sense. Why reinvent the wheel when there are already proven solutions on the market?
But when software touches your core value proposition, the equation changes. It’s hard to push the envelope with legacy platforms and generic tools weighing you down. Plus, how can you generate a competitive advantage if you’re using the same solutions as everyone else?
Think about your wardrobe. For most of us, the time and expense of filling our closets with custom-made clothing isn’t feasible. T-shirts and shorts off the rack work just fine for everyday wear.
When it comes to a new suit, though, it’s worth taking the time and expense to ensure it fits just right. You want to go into important meetings and special occasions looking and feeling your best.
Logistics software is a strategic asset for your business, and just like a tailored suit, it’s worth taking the time and effort to ensure it fits perfectly.
Case in point: The customer experience
Pre-packaged solutions can be a great choice for departments that aren’t competitive differentiators, like back office functions.
But a one-size-fits-all approach doesn’t make as much sense for vital areas like customer service. Custom-made logistics management software allows you to stand out from the crowd by providing unrivaled customer experiences.
A tailor-made customer service portal, for example, can allow your customers to:
- Track their orders in real time
- Receive proactive communications about potential delays
- Manage delivery preferences with ease
- See your branding rather than that of a generic solution
This commitment to transparency can be a game-changer for customer satisfaction and brand loyalty, but it’s hard to pull off with a pre-packaged solution.
A truly differentiated customer experience needs to be built from scratch.
Long-term ROI
The first thing most CIOs will ask themselves is which option will generate the highest return over the long run. It’s a simple question, but too many leaders fail to factor in hidden costs.
To get a clear picture, we need to consider the total cost of ownership (TCO), which includes often-overlooked factors like integration headaches, customization limitations, and opportunity costs.
The cost of pre-packaged solutions seems straightforward — you get a product jam-packed with features at a fixed cost. However, the sticker price fails to capture some hidden expenses that can quickly erode ROI.
These include the time and effort required to integrate it with your other systems, which can require manual workarounds and dealing with functionality gaps.
As Lumenalta backend developer Guilherme Castro notes, “In our experience, off-the-shelf solutions often miss the mark at providing custom functionality that is either critical to business performance or the unique value proposition of the product that sets it apart from the competition.”
On the other hand, custom software requires an upfront investment in development time and resources, from either your internal team or an external partner. There are also opportunity costs to consider, as developers could be working on other projects instead.
A tailored solution might seem like the more expensive option initially. But, since it’s custom-built according to your existing systems and needs, you can avoid the cost of manual workarounds and other headaches on the back end.
Case in point: Intelligent warehouses and more
Castro illustrates the advantages of custom-built software with an example of a warehouse solution.
“Custom logistics software can act as the central nervous system for your warehouse. Since these systems are designed based on the client’s existing infrastructure, we can connect to their robotic picking arms, generate custom-sized boxes perfectly fitted to the items being shipped…the possibilities are endless.”
Beyond the warehouse, custom software can also optimize delivery routes based on real-time traffic data, considering factors like one-way streets, rush hour congestion, and even parking availability.
The benefits here are manifold: fuel cost savings, more on-time deliveries, and drivers spending less time stuck in traffic. With an off-the-shelf solution, this capability might require complex workarounds and system integrations.
Ultimately, after incorporating all hidden expenses into your TCO, most users find that tailored logistics software provides a higher ROI in the long run.
- This aligns with my experience, yes, specially if the custom software is carefully scoped to be at the center of a business vision. That can evolve and grow in a bespoke manner that can be a critical differentiator. It’s also often less risky than betting on a solution that’s outside their control.
- Important to factor in the timeline since of course off the shelf software generally will allow the business to provide some value much earlier, so that has to be taken into account, while custom software can evolve and provide flexibility and unique value over time.
Scalability for future growth
Out-of-the-box logistics software is a great starting point for businesses that don’t have a deep bench of developers or a complex suite of systems. When you just need something with basic functionality to get up and running quickly, it’s a good choice.
But as your business grows, the constraints of these one-size-fits-all solutions can quickly become apparent.
Case in point: Growing pains
Here’s a scenario to paint the picture: imagine starting a local delivery service focused on efficient warehouse management. You opt for a pre-built software solution that covers your bases: order fulfillment, local delivery route optimization, and real-time inventory tracking.
Business starts booming, and you decide to expand into national distribution.
Suddenly, the rigidity of that solution becomes untenable. Features designed for local deliveries don’t have the flexibility you need for long-haul logistics. Data sharing issues proliferate.
You ask your developers to patch these gaps, but it turns into a Frankenstein-like system of duct-taped fixes and manual workarounds. At this point, it’s probably time to upgrade to a custom solution.
Because it’s built with scalability in mind from the outset, a custom solution can grow alongside your business. Adding international shipping modules to accommodate your global reach? No problem. Complexities like customs clearance? Easily handled with add-on tools that manage tariffs, duty calculations, and electronic documentation.
For most of us, the first suit in our closet came off the rack. It was a good starting point, but eventually, it became time to graduate to a tailored one.
See an example in this logistics case study.
Invest in the future of your business with custom logistics software
Both buying and building software can be the right choice for an organization — it all depends on individual circumstances.
Here’s a good framework for making the decision: if you’re looking for a solution to a common business problem (like managing employees or keeping track of your finances), a generic software tool will probably do the trick.
But if your value proposition hinges on the software’s functionality, building it from the ground up is worth considering. Being on the cutting edge of innovation requires going beyond solutions that everyone else is using.
At Lumenalta, we build custom solutions to perfectly match your infrastructure and specific needs. Our team of seasoned logistics veterans has seen it all, and are primed and ready to help you implement software that’s an extension of your business, not a compromise.
