Purchasing vs In-house Delivery Logistics Software: To Build or Not to Build

Purchasing vs. In-House Logistics Software: Build or Buy?

We’ve officially reached new highs for delivery penetration. For retailers, it’s no longer a question of whether to deliver, but how to deliver better, while balancing the cost and speed of implementation. Logistics providers, in turn, see an influx of demand for B2C delivery, and next-day delivery, and are looking for solutions to better manage these new operations. Some turn directly to ready-made, out of the box solutions or customizable logistics software to improve their delivery operations. Others look into building the relevant technology in house. But which is the better approach?

The dilemma of building vs buying isn’t new and is applicable to most aspects of business operations. We understand the impact and implications of such an important strategic decision. After all, delivery software impacts many roles within the business – management, dispatch, drivers, partners, shippers and end customers. Like any other business decision, companies have to assess the pros and cons of both options.

This post explores the key issues that businesses must consider when choosing to build or buy logistics software of any kind.

How logistics software works

In order to understand the considerations involved in logistics or logistics management software, it’s important to first look at what this means.

Logistics relates to the transfer of goods from the point of origin to an end location – often a consumer or business – and often with many additional stops in between. Logistics management involves coordinating the delivery of goods and managing the chain of custody from the first mile to the last. This involves planning delivery times, selecting a fleet for the transportation, planning the route, and coordinating the transportation with complete visibility.

These operations require high levels of coordination and communication between multiple players within and outside of the business transferring the item, including the end customer.

Logistics software can involve:
– Warehouse management software
– supply chain management software
– Inventory management software
– Transportation management software (including tools for dispatch and route management)
– Third-party fleet management software
– Logistics scheduling software
– Driver and vehicle management (e.g. in house fleet management).

Reverse logistics approach the same flow and considerations, but backwards – with the end consumer being the point of origin, and the end location being a warehouse or fulfillment center.

Logistics management software is about replacing manual logistics operations to enable faster growth of delivery volume, greater delivery speed, and better risk management. In essence, is about getting the right items to the right customers at the right time. Customer experience is also an important consideration, as both brands and end customers desire visibility into the delivery process.

While a few retailers manage their logistics in-house, the vast majority expect their delivery providers to utilize a technologically advanced logistics management system with real-time data transfer and advanced automation. This stresses the imperative for logistics providers to apply logistics management technology that improves their delivery services.

Why businesses are considering the in-house approach

For retailers considering building in-house logistics management software, incentives fall into several categories:

Profitability – ecommerce fulfillment has gone from being a small side business to a core chunk of retail sales. Many businesses – especially grocery brands and D2C brands who sold on marketplaces – have recently moved away from outsourcing parts of their ecommerce. These brands realize how much customer data they lost and how little they controlled the relationship with their customers, and are reticent to look outside again for fulfillment solutions.

High unemployment rate – We are witnessing the market transform into a true gig economy. Many gig workers have been forced out of work, and are shifting to delivering for multiple crowdsource providers. The resources for managing delivery in-house have never been so readily available.

Experience – Logistics providers have slowly but steadily been replacing outdated manual operations with digitization and automation, some of which may be created in-house. Retailers, too, are more experienced with delivery than they were a year ago. Having worked with some form of logistics technology, these retailers may feel they have a great enough understanding of the technology’s application and their own needs to implement their own in-house software solution.

Now that we’ve discussed the considerations for building logistics software in house, let’s look at why many businesses prefer the alternative: using readily-available, pre-existing logistics management systems.

The Case for Purchasing SaaS Logistics Software: 9 Key Considerations

1. Time constraints
2. Technical expertise
3. Integrations across the supply chain
4. Managing third parties
5. Budget and maintenance costs
6. Onboarding, transitioning and disruption
7. Risk management and safety
8. Flexibility and future growth

1. Time Constraints

Planning is imperative when creating or deploying a new operational system anywhere within the supply chain. Developing a bespoke software platform isn’t an easy task and it takes significant time and investment. But the plain truth is that retailers don’t have six months to get new logistics software up and running.
Efficient delivery that your customers can rely on today has become mission critical. If a year ago, profitable businesses could afford to take the time to build in house software, this is no longer the case. And while some companies will be initially lured by the idea of creating a ‘made-to-measure’ solution, it is important to set realistic expectations about the time it will take to build and complete, and not just at minimum viable product stage.

Party City, the largest retailer of party supplies in the U.S, faced this issue in early 2020.

When Covid-19 made in-store purchases dwindle, the retailer pivoted to in-store and curbside pickup. While they had planned to build an in-house solution, the swiftness with which they had to pivot to omnichannel fulfillment led them to realize that time to market would come at the cost of market share. They opted to use Bringg to accelerate automation of same-day delivery and curbside pickup instead.

On the flip side, an out of the box solution is ready immediately, to help you deliver faster to customers. It should be built to have the capability to be customized to the client’s needs. A pre-built solution has the added advantage of taking future iterations, software updates and maintenance off of your hands. These can also be extremely time consuming and in many cases hold back company growth.

2. Technical expertise

86% of digital transformation projects in the supply chain fail. 

While an in-house dev team may be capable of developing a delivery logistics technology solution, it might not be their core competency. When purchasing a purpose-made solution from a tech vendor that specializes in the field, you’re buying technology that has been tried and tested by a team that understands the challenges from multiple points of views and client use cases.

This is critical, since 86% of digital transformation projects in the supply chain fail. Your logistics operations are too strategically important to be allowed to fail. It’s important to highlight this in order to understand that purchasing technology goes way beyond buying software – it’s also about tapping into the know-how of experts that will be able to assess, advice and even preempt future issues or challenges with significant foresight.

3. Integrations across the supply chain

In house development means often that the integrations will be hard coded. If a third party system – is changed for whatever reason, it is not simple to change out one for another.

One side of integration is with existing platforms within one’s own organisation; another is integrations with systems in your partner organisations.

3PL providers and third party logistics companies, for example, need to integrate with their shipper’s systems; if you are a retailer, you’ll be using third party fleets and may need to integrate in order to provide customers with scheduling options. Restaurants need to integrate their menu across all eCommerce marketplaces to ensure consistency.

These integrations – including POS, OMS, TMS, and WMS systems – are critical for collecting and transferring data from across the supply chain that affects the success of your delivery operations. This can include data on inventory, order location, driver and vehicle data; fleet availability, order details, and more.

Seamlessly integrating multiple systems, and ensuring that data is transferred, in real time, is not an easy process. Out of the box logistics management software which can integrate with your existing systems – as well as those of your customer or partner – will significantly speed up your logistic software’s time to launch. The best logistics software will also include a real time sync between teams and systems, allowing for greater optimization of delivery speed and efficiency.

4. Managing third party logistics

Will your logistics software solution allow you to manage third parties as well as in-house fleets?

For retailers, logistics operators or providers are the medium through which customers experience the retail brand. To ensure good delivery experiences and customer loyalty, retailers must have a measure of control over external fleets. And even if you aren’t using third party logistics or 3PL providers at the moment, chances are that you will as you expand delivery operations to additional retail locations or regions.

Read: Third Party Delivery Done Right: Why We Built a Delivery Network

Logistics providers, too, often work with multiple contractors, each of whom may independently handle planning and routing for their drivers. This means that any logistics management software must be accessible to contractors outside of your company.

Enterprise logistics management software takes third party logistics into consideration. The more robust software will include different user roles that allow third party providers to dispatch drivers, plan routes, and view delivery performance – but only for their teams. The main user is able to view data from all third party providers. This dual resolution of visibility and control is difficult to achieve without taking the needs of your partners into consideration.

Logistics software built according to these parameters in mind will provide the tools that both you and your third party fleets need to expand operations without negatively impacting speed, visibility or the customer relationship.

5. Budget and maintenance costs

Building a robust logistics software that can withstand surges in volume is neither easy nor inexpensive. Furthermore, maintaining logistics software internally takes ongoing resources which often are not accounted for in supply chain budgets.

While having full ownership over the scope and scale of a platform will suit some companies, it is important that they take into account the ongoing maintenance costs and resources needed throughout the entire lifecycle of the product. Most ready-to-use logistics software includes regular upgrades, new features, and maintenance as part of the subscription cost, along with volume tiers that allow businesses to rapidly expand their usage without rewriting the software. Given the time and money this can save your businesses, it is often the preferred option for companies who view their logistics management software as a strategic, long-term solution.

6. Onboarding, transitioning, and disruption

Will onboarding teams to the new logistics software impact driver efficiency?

Companies must consider carefully what the onboarding or rollout for their technology looks like. Implementing swiftly and with minimal disruption is key; however onboarding staff and getting buy in from all internal stakeholders and employees is also critical.

Transitioning your operations to a new logistics software system, and onboarding users, can cause disruptions to individual tasks and your logistics operations as a whole. If done badly, it can even contribute to churn rates. This is enhanced within the logistics space because of the direct impact the changes have on the day jobs of many employees and ultimately the customers and recipients.
High-rated logistics software solutions are generally developed with ease of use – as much as efficiency – in mind. If employees have access to onboarding materials and applications which are easy to use, it will ensure a fast onboarding process and a positive impact on efficiency.

7. Risk management and safety

Supply chains are notoriously averse to risk. According to Gartner’s Hype cycle for supply chain management technology, 48% of respondents would only work with technology that has passed the earlier phases of the hype cycle. Given this, it’s no surprise that companies carefully weigh options before making decisions on software for logistics management.

When you purchase logistics software, part of that price tag includes tools that minimize legal risk, protect drivers, and ensure that your logistics operations meet the required regulations. For example, solutions may include driver flows with mandatory safety training which must be completed before drivers can move on to delivering. Drivers can manage contactless delivery through photographic proof of delivery.

The best logistics software providers even include telematics integrations which can track driver behavior and prevent accidents before they happen. These are not just add-ons, but elements that are critical to the efficiency and bottom line of your logistics operations.

Another type of risk which purchasing software removes is a reliance on internal stakeholders. Many businesses unwittingly leave operational planning and execution in the hands of one or two skilled employees. This creates a dangerous knowledge silo that can disrupt operations if the employee leaves. By turning to a SaaS logistics solution, businesses remove this danger entirely and let the software provider function as an evergreen knowledge base for their operational use cases.

8. Flexibility and future growth

Don’t lose time on building a solution that may not scale.

If you build software for your current needs, trying to expand it to fit other use cases later may be like putting a patch on a leak instead of fixing it. You need solutions which fit your needs now, but will give you room to expand later on.

Many vendor-based solutions are flexible and allow for customization or modifications to their functionality. A rare few will offer tools which can be launched immediately, but which can also be customized, merging the advantages of in-house and purchased logistics software.

When we created Bringg, we ensured that the out-of-the box solutions include open access and configurable features, allowing for self integration and in-house development. The combination of a modular platform with advanced open technology allows businesses to customize the software to meet their specific use cases, and easily expand as your delivery channels grow.
You can learn more about Bringg’s platform here.

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