The question to build or buy a WMS system comes up more and more throughout all industries. There are lots of companies questioning whether they should take the road toward building their own system out or buying something already made to handle the task. First of all, what is causing the question? It used to always be an immediate simple answer to buy the software. But, as of late with software becoming easier and cheaper to create, it certainly makes sense to at least question the classic line of thought. In this post, we’ll explore whether or not to build or buy a WMS system and the factors which enter into this decision.
On question and answer site Quora, you can find multiple responses to this very question. The vast majority of the answers to build or buy a WMS system are in line with the mentality to buy the WMS and customize it, or make it work with he systems in place that you need it to work with. But, this is not quite as straightforward in all cases.
What factors enter into a build or buy decision?
- Size of business – This may be one of the biggest factors. It’s a big factor because the larger the size the more people and $$ you have to do things with. Building out a WMS will take a lot of effort. It’s not a simple build and implement, it’s hiring the team to build it, selecting the features, making the integrations, and getting it implemented. A larger business can afford this process, while not losing sight on the primary business, which may be selling your clothing, building the cars, or simply allocating product to a job site.
- Type of Business – Equally as important when considering to build or buy a WMS system is the type of business you are in. If you plan to compete at the highest levels, then you need the greatest sources of innovation. If it’s in your business interest to become quite a bit more technically savvy, then you may choose to build. The likely scenario is that it’s an eCommerce business with a great product, but that does not have the bandwidth to build out the WMS. Here, it should certainly be a buy decision. If the company is a technology company, which now has a large inventory of assembly components which are being put together by robots, this might be a case for building it. You can see how the type of business dramatically changes the build or buy a WMS system.
- Business Goals – It may just be that you aim to become the next Amazon. In this case, you will absolutely have to build out your own system. You may not build the system right off. It’s going to be quicker to buy the system while you are getting the growth phase going. Then, over time you will want to start building the system. Our typical client receives about 135% ROI from implementing the dHUB system in year one. That being said, it makes very much sense to start there and build as you grow. But this is overshadowed by the why. If you don’t have the absolute conviction that your business will not survive unless you start building the WMS, you’ll face a long, steep, uphill road.
Those are not the only factors which enter into whether or not build or buy a WMS system. On that note, most factors could easily fit into one of those categories.
Build or Buy a WMS System – Buy Side
Ok we’ll first look at the advantages of buying a WMS system, since this is where most businesses will fit into.
- There are many WMS’s available. Buy a system that offers the features you need
- Take a hybrid approach and use the WMS’s API to build onto rather than build entirely
- Save money to put into building the business – buying will be cheaper short-term, and likely about the same cost long term
- Leverage the cloud to keep costs lower and bring the WMS anywhere you need
- Make sure the WMS has a dedicated app to handle the “movement” of products like the dHUB app which handles product check-in, picking, packing, ordering, loading and routing
- Customize the solution with integrations or using the API
- Utilize the existing infrastructure to move your business forward. This could be through features you didn’t even know you needed
- Quickly leverage the pre-made connections to other applications
Those are some of the more prominent “pro-buy” arguments. Now let’s take a look at the “pro-build” arguments.
Build or Buy a WMS System – Build Side
For larger businesses, and dedicated IT teams, this might be your long-term competitive advantage, but it’s wrought with challenges.
- Built exactly what you need
- Customize each piece of functionality to suit the needs of your customers
- Full control over hosting, deployment, and underlying infrastructure
- Cost-savings perhaps over tier 1 ERPs
- Streamlined code which doesn’t require all the generic functions not relevant to your business
- Tackle innovation within the supply chain activities to suit the future needs of the business
- Integrate with in-house systems
Those are some of the most pressing concerns when you look to build or buy a WMS system. Of course one of the larger concerns would be cost as well. So let’s break that down a bit.
Costs to Buy
Here is a very informative post on the costs to buy a WMS system. Try to consider the following in your pricing assumption:
- Upfront or implementation costs: these could be as high as several 100 thousand dollars for large tier one ERP/WMS systems or for a system like dHUB for small and medium sized enterprises could be a smaller $5-$10k depending on the custom integrations and/or functionality requirements
- Monthly SAAS fees. These will be the majority of the cost, and typically is based on the number of users within the system. At a base plan for around $50-$100/month/user for a system with the majority of the functionality you will need. For larger tier 1 systems you can expect to pay between $200-$400/month/user for the full suite.
- All in you’d be looking at a wide ranging cost estimate depending on the size of your business and the true needs of the system. For one of the recent dHUB installations we handled it over one quarter and it was at a cost of $12,500 upfront and $75/month/user for 10 users to give you an idea.
Costs to Build
- Minimum 3 engineers full-time at ~$100/hour
- 1000 hours minimum development time * 3 * 100 = $300,000
- Server costs ongoing could be again a very wide range depending on the business size, but generally you should assume for each employee it will be roughly $10/month in server costs on any of the major cloud providers
So with that all said, the question to build or buy a WMS system is quite situationally dependent. Take all the needs of your business into account and make a pros/cons list to figure out what the best course of action will be. As a general rule businesses below $100m in annual revenue should likely consider a pre-built solution such as dHUB. Businesses over this with the resources to commit to the project, could start considering building their own WMS to take on a more innovative path than what the current solutions may be able to provide.
If you are in the market for a WMS system, it’s at least worth a look and perhaps an initial meeting to discuss your needs and whether the dHUB WMS and distribution system is a good fit for you. Reach out to a email@example.com to schedule a meeting.
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