Build or Buy Best of Breed Software – What’s Right for You?

OS16 build buy panel
Left-right: Ashley Kohnen, Shao Li, Keith Kirssin at Operations Summit 2016 (photo credit: Curt Barry)

At the recent Operations Summit 2016, I led one of the best panels ever on warehouse software strategy. What made the panel so effective was that each participant easily articulated why their three radically different approaches worked best in providing order management and warehouse management functionality for their company.

Ashley Kohnen, co-owner and COO of LEM Products, a multichannel seller of meat processing supplies for the do-It-yourself hunter, said her company had its prior OMS for 10 years and had outgrown its capabilities. She felt that as a small to moderate sized company they did not want to develop their own systems. They would select the best software vendor and depend on them to continue development and provide ongoing support. LEM’s leadership recognized they needed consulting assistance to help with the vendor short list and weigh in on the selection process.

Ashley took on the role of project manager during the seven-month implementation. She spent anywhere from a couple days a week to almost full-time hours managing the conversion with the vendor, file conversion discussions, internal process changes and getting ready for the go Live. And I might add she made the right decision. This isn’t the job of the vendor because they don’t have responsibility for your people, process changes, training and ultimately the way the system is implemented – you do.

Keith Kirssin, president of third-party logistics firm BoxInBoxOut, which is listed on MCM’s Top 3PL list, achieving new functionality is very much driven by the needs of its client companies. BoxInBoxOut has a small IT department responsible for design, programming and implementation and used a combination of commercial systems and internal programming to gain functionality. Keith pointed out what every company with an internal IT development team knows – IT is a vital player in managing change and understanding what it takes to make departments more productive, bringing innovation that keeps their customers competitive.

Shao Li, senior operations manager for UncommonGoods, a seller of unique gifts and creative home décor, Shao had a uniquely “uncommon” approach. His company has a 15 member IT staff that not only develops order management and warehouse management systems, but is truly innovative. If you look at the picture you’ll see Shao holding a company designed and produced handheld scanner that they developed and implemented for their large warehouse operation, at a total cost of around $10,000. The manufacturing cost was 10% of commercially available units. The project uses scanner frame produced on a 3D printer, commercially available technology and runs off the Android OS and related smartphones. It’s one of the most innovative things I have ever witnessed!

Keith and Shao both pointed that if you’re going to develop your own systems, the IT department must team up with the user departments on design, development and testing. All three panelists agreed that defining written functional requirements is critical. Key people in the company also need to stay current with what industry best practices are in the application areas being developed.

I noted in the session that 50% of the large projects are not delivered on time or within budget.  Reasons include lack of project management, faulty expectations and budgets from the beginning, an inability to fully comprehend new system functionality early, and file conversion and testing that takes longer than expected.

In my experience, management needs to know early on the following points, which are often difficult to accurately determine before committing to the project selection and implementation:

  • Will a commercial system fit my business, and what are the potential gaps requiring modifications or process changes?
  • Am I willing to change my internal processes rather than modify?
  • What is an accurate estimate of the total cost of ownership for acquisition and annual support?
  • What is the timeline for major tasks to get done from today through go live?
  • Who will manage the project? 

Most of the initial acquisition cost is in professional services by the software vendor including education and training, modifications, weekly staff project and status work, file conversion specifications and testing and go live responsibilities. Professional services can be 1.5 to 2 times the license costs. The other unknowns in larger projects are accurate equipment configuration including data repositories and report servers, system instances for development and testing, user training and production, fail-over data storage and archiving data.

I want to again thank our excellent panelists for sharing their practical experience and what worked for their companies in successfully acquiring and implementing systems.

Curt Barry is Founder & Partner of F. Curtis Barry & Company

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