Everyone who’s ever started a business or worked for one has been affected by the build versus buy dilemma. Decisions made in the C-suite affect all employees, not just supply chain and logistics managers. The frustration of not being able to access siloed information, legacy purchases of off-the-shelf or custom software that was supposed to make everything better but didn’t, the exorbitant cost in both time and implementation of software solutions, and the often steep learning curve involved in training employees to use new software are all part of what makes the purchasing process complicated at best and painful at worst.
Depending on how extensive your supply chain is, the following factors are just some of those that will influence your choice of a commercial, off-the-shelf (COTS) or custom software solution:
- ability to incorporate IoT real-time data
- the sophistication of your existing warehouse control, management and execution systems
- transparency throughout the entire supply chain
- incorporation of machine learning into all systems from warehouse management through supply chain planning and visibility to meet consumer demand
Here’s an old but good six-step system to make the custom vs. COTS decision:
- Validate the need and evaluate the ROI of any enabling software you plan to invest in
This involves both strategic planning and number crunching. In order to build a case for a new software purchase of any kind, you need to not only find the software that’s working for your competitors but also have to make sure it’s going to solve a problem that’s impacting the bottom line.
- Determine your core business requirements
If your business can’t continue without new software, you need a software solution fast. That may well impact your choice of whether to buy or build. But if the solutions available aren’t going to fully meet your needs and aren’t critical to business success, you might be better to hold off or start the custom build planning process for implementation later on.
- Look at your architectural requirements
You’re going to have to take a long hard look at your existing tech infrastructure, how those systems will interface with new software, your existing corporate standards (will the software play nicely with your corporate browser or is that going to be a problem?), and the operating systems your business partners use.
- Examine the systems you’re already using
Is your organization already using a system that can be expanded or adapted and that’s solved problems in one area? Can this be extended to another operational function? Or repurposed?
- Think about how a custom solution will be supported in-house
Look at the costs involved in training or hiring in-house personnel to implement and maintain your custom solution. If you don’t have someone in-house, you’ll be at the mercy of your supplier every time something goes wrong. With COTS, tech support is part of the package.
- Will a COTS solution work for you?
If so, you’ll be able to delegate upgrades, design problem fixes, and data migration when the data architecture needs modification to your supplier.
As part of the planning process, here’s a list of pros and cons to be considered. A custom solution may be the answer to solve a problem that’s unique to your organization.
Other things to consider:
The time factor
Both engineering and quality assurance take time. How soon do you need a solution? Will a custom build or a COTS solution get you there faster? Is the time factor critical?
Hidden costs of custom and COTS solutions
What kind of technology debt will you incur if you choose a COTS solution? Will it pay off in the short-term, or only in the long-term? Will the solution still be viable long-term? What other projects will you have to put on hold while your engineering team is all hands on deck designing and implementing a custom solution?
Luckily there are lots of tools available to help you make recommendations, including build versus buy calculators. But beware of the myth of the custom solution as a magic wand. As Chris Doig says, “The allure of building software is that all requirements can be satisfied, but that is a mirage. Resource constraints mean coding must be prioritized, and some requirements will never be met.” Here’s an interesting series of short case studies that advocates both custom built and COTS solutions for the same company.
And that may be the key to success and to answering the ongoing build versus buy question: build and buy. Now that SaaS and cloud solutions have taken off and many software solutions offer subscription-based pricing, getting funding may be a little easier (and a larger percentage becomes an operational rather than a capital cost for businesses).
A third-party solution that provides core functionality for today but can be built on to provide future solutions might be the answer. Or, you could partner with a 3PL firm that focuses not just on providing warehouse and transport but on developing innovative technology as well.
One way or the other, there’s going to be pain. But by putting in the time to evaluate all the factors involved in choosing a rational software solution, the gains will outweigh the pain quickly enough that you’ll be able to face the prospect of going through the whole process again in five (or three?) years’ time.