20 Oct Standard or Custom Software?
IKEA and Amazon are two extremes in their software approaches. IKEA embraces standardization and relies on off-the-shelf software, while Amazon focuses on innovation and builds its own software. This choice raises an important question. Which approach is most suitable for your company: Make or buy? In short, are you an Amazon or an IKEA?
IKEA symbolizes standardization. The furniture giant uses the same WMS package Astro from Consafe Logistics in all distribution centers around the world. The distribution centers work according to a uniform blueprint, with no room for customization. Several times a year they upgrade to the latest version of the WMS, which is a big job. However, the approach ensures that the software remains manageable in all global distribution centers and is always up to date, both technically and functionally. This seems like a best practice in terms of standardization.
On the other hand, Amazon has developed its own WMS from the ground up. In their tailor-made WMS software we find smart functions that are not found in standard packages. Clearly, it costs Amazon a lot of money and effort to maintain their own system, but this allows them to quickly deploy new optimizations without being dependent on software suppliers. This also seems to be a best practice.
It turns out that there is not one ultimate approach, but rather two effective approaches. Let’s first take a closer look at standard packages. Nowadays there are numerous ready-made WMS packages on the market. In the past, companies sometimes opted for tailor-made software because they could not find a suitable package, but modern packages offer many more options. Various working methods and control rules can be configured via parameters, business rule engines and workflow tools. This offers the opportunity to continuously adapt processes to future market developments or new insights. In addition, WMS suppliers regularly release new versions of their software, ensuring that the WMS remains technically and functionally up to date.
However, using standard packages also has its disadvantages. Companies must tailor their processes to the capabilities of packages. Even though they offer plenty of options, there may be times when a desired feature is not available in the package. In that case, concessions must be made in the way of working or customization of the package is necessary. This is where things often go wrong. Companies do not want to make any concessions and have all kinds of customizations being built on top of their packages. The problem here is that these customizations are not part of the standard software and therefore will not be automatically updated in future versions. As a result, the software can become outdated over time, making adjustments increasingly difficult and expensive. Companies have nowhere to go. They do not enjoy the benefits of custom made software, nor those of off-the-shelf software. This is unfortunately a common problem.
Logistics processes are not designed once and then remain unchanged for years. Market developments, changing assortments, technological progress and new management insights require continuous optimization of warehouse processes. This requires a flexible WMS that can easily be adapted, something that both IKEA and Amazon understood well.
When implementing standard WMS packages, we regularly see customizations being built. However, on should consider whether these customizations are really necessary:
- Bad practices: Existing working methods may become outdated. Packages often combine best practices of many warehouses, so there often is a better alternative to your “bad practice”. It is crucial to examine your own processes with a critical eye and look for options within the package.
- Unhappy flow: In addition to the normal “happy flow” there are always exceptions and problems that arise from time to time. The WMS must support this “unhappy flow”, but it does not necessarily have to be efficiently. It is often wiser to focus on preventing these exceptions instead.
- Touchpoints: The WMS communicates with external systems. These systems send various messages with different structures and information. Customizations are often necessary to allow systems to communicate with each other. A best practice is to use an integration platform that links systems and translates messages into known formats of systems. In this way, the WMS can communicate according to its own formats and customization is unnecessary.
- Specials: There are always specific aspects that are unique and essential to your company. These must of course be supported well by the WMS. For these it may be wise to have customizations being developed.
Make or buy?
At the beginning of this blog we asked the question what is better: Make or buy? The answer is that both options are valid as long as you maintain flexibility to continuously optimize your processes. A survey among large logistics service providers into the use of WMS shows that they are saying goodbye to outdated WMS packages with lots of customizations, but are also moving away from tailor-made software. It seems that maintaining long-term flexibility can also be challenging for those who build themselves.
Are you an Amazon or an IKEA?
Which choice best suits your company depends on whether you are more like Amazon or IKEA. A standard package will often offer the best solution, because modern packages provide many options. However, it is crucial to limit customizations to aspects that are unique and essential to your business. For companies that want to be at the forefront of logistics innovation, tailor-made software may be preferable. However, this implies that you will have to be the driving force behind the innovations yourself. The choice between tailor-made and standard software therefore depends on the objectives of your company. As long as you maintain flexibility to continuously optimize your processes, both options can be successful choices.