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You now have a choice. Do I “build” or “buy” a logistics control tower? Many still feel it necessary to build their own system. They feel they can do it for less. Or they feel that commercial systems cannot be customized to meet their unique needs. Or they feel that by using commercial systems they’ll no longer be able to differentiate themselves from their competitors.
While there was a time when you had no choice but to build your own systems, those days are now gone. Today, promising logistics startups are rolling out SaaS solutions that offer powerful and flexible functionality, and they are ready to disrupt the old industry with the latest technologies.
In this blog post, we’ll further explore the “build versus buy” dilemma.
What’s the goal of a logistics control tower?
Logistics control towers are much more than a simple shipment tracking tool, they play a direct role in:
- Reducing inventory and transportation costs
- Freeing up cash through faster more reliable order-to-cash cycles
- Improving reliability and service levels in customer service
- Driving revenue and business agility.
These systems are large-scale, complex and mission-critical. For some organizations these systems must work across multiple industry sectors so they must be highly configurable, they must scale globally, and they must be high performance and highly available. Can such a system be developed internally? Or should it be acquired from a software provider?
If the control tower concept in general is not clear to you, DSV did a good job at explaining it here.
Is it really that difficult to build?
Initially, there were no viable software vendors or promising startups providing logistics control towers in the market. So the only remedy to achieve increased visibility was to build your own system. Information technology was, for many, close to a core competency. But those days are long behind us now.
Yet many still feel it necessary to build their own systems. Why?
- A misunderstanding of the true scope and costs, they think they can do it for less.
- A belief that their business needs are too complex or unique for an “off the shelf” solution
- They feel that the use of a commercial system used by others makes differentiation impossible
For those who are convinced they should build their own, here are a few thoughts to consider before you start.
Getting the data
Global logistics control towers are unique in several fundamental and important respects. First, they are more than just a bunch of nicely linked software applications that are communicating order statuses. Visibility requires hard-to-get timely data to make it usable. And the data that is needed often resides beyond your own organization within systems of external partners and software providers. This will prove to be one of the most challenging technology and social engineering maneuvers you will face.
Turning the data into something useful
What about ”off the shelf” systems?
Visibility has gone mainstream and so did the software providers. Commercial systems not only exist, they’re proven, and their functionality continues to broaden and deepen to cover even more process areas. As customer requirements increase technology vendors are continuously raising the innovation bar.
Outperforming on Total Cost of Ownership
Commercial “off the shelf” IT vendors outperform corporate IT teams on Total Cost of Ownership (TCO) for the simple reason that they can spread the cost of their investment across a broad market. They’re paid for their solutions, and they pour their revenue back into innovation and product quality. They don’t need to charge any one customer “full boat” prices to recoup their development costs; they make it up on volume.
The company that decides to develop in-house, on the other hand, must shoulder the whole investment alone. It’s bundled in with other services as the “cost of doing business.” IT is viewed as an expense, not as a business in itself.
High degree of configurability
The best-in-class logistics control towers have taken customization needs into account so they give a high degree of configurability in user interface design, naming conventions, workflow, and features. A range of potential customers in automotive, high-tech, pharma, chemicals, retail or 3PL verticals can be operating on the same underlying architecture. They exist on a single shared, cloud-based technology platform. These commercial systems are designed to be customized so they can scale up and across numerous unique use cases in dozens of different market sectors. These are highly configurable, highly flexible systems.
The downside to differentiation
Companies who don’t want to settle for a generic visibility system from a software vendor because they’re afraid they’ll lose their competitive differentiation forget that their in-house system will only serve them, and not their potential customers and business partners. Or even worse, home-grown logistics systems run the risk of being perceived as highly proprietary lock-in strategies that limit choice and flexibility.
Companies that harness the power of commercial systems get the best of both worlds; they can customize and adapt their systems to reflect their own unique and truly differentiated operating processes while communicating an openness and flexibility at the same time.
The market of “off the self” transport visibility software systems is active and growing. There are numerous large providers and promising newcomers. In the spectrum of IT initiatives, technology for global transport visibility is not a small IT project. A decision to “build” is a fundamentally flawed financial and commercial decision.
Companies who need the technology no longer gain significant competitive differentiation by building the technology. They differentiate by how they use it. No one builds their own ERP system anymore. There was a time when companies had no choice but to build their own systems. But those days are behind us now.
You simply shouldn’t build your own logistics control tower system because
- They are very complex
- They require a significant capital investment
- They require a significant operational investment going forward over time.
- Internal IT teams must keep pace with growing successful commercial vendors whose sole focus and core competency is on building the very best visibility systems.