Save a million on ERP: An alternative to off-the-shelf software for logistics

How the use of ERP software for logistics can help you grow your business and the main advantages of custom-made solutions

25Jan

Enterprise resource planning software or ERP is a management solution that combines different types of tools intended to increase the overall performance of a logistics organization. This kind of software is irreplaceable when it comes to working with business information, keeping customer satisfaction at a high level and ensuring optimal business processes efficiency.

Logistics is an industry that has a lot of moving parts which makes it very difficult to handle all the data management manually and different software tools won’t work well due to the lack of integration. The only solution that can guarantee the facilitated information flow within a logistics organization is ERP software.

Nowadays, logistics companies can choose one of two main ways of leveraging modern technologies that simplify the management of business processes: Off-the-shelf software and custom-made solutions. The choice is not so obvious and may cause frustration for those who haven’t enough experience. Today, we’ll discuss how the use of ERP software for logistics can help you and illuminate the main advantages of custom-made solutions.

Why logistics is so expensive and complex

The fuel is probably the first thing to worry about when we talk about cost management in logistics. Oil prices are at the center of transportation challenges for logistics companies nowadays. Freight movement price is mostly dependent on fossil fuel prices. According to the Statista, monthly prices of diesel in the US are continuously growing which makes this part of the logistic business a pretty severe issue.

Courtesy Statista

Inventory management is another significant cost in logistics. It’s barely possible for an organization to have a service center within driving distance of every end user. It’s also infeasible to maintain a central stocking location covering the needs of all clients all over the world. Therefore, efficient management in logistics implies precise determining of how much inventory you need on hand including the probability of unexpected surge of orders. Also, you should keep in mind your average time to a client to be able to keep customer satisfaction at a high level. Maintaining stock records of goods and recording of damaged goods introduces additional complexity and related costs in logistics.

Transaction costs management in logistics include tasks related to the placing and accepting of an order. You have to deal with vast amounts of data while issuing and managing invoices, organizing delivering routes, responding to customer queries, following up with clients for payments and checking the current progress of all these activities. To estimate these costs and define the possible ways of reducing them, any logistics company has to monitor the workflow starting with the arrival of an order through the delivery chain and ending with the invoicing process. Since transaction costs come from overly complicated procedures, dealing with all this info is barely possible without a properly designed ERP software.

Besides the described issues, there are also some hidden expenses that are not so obvious and therefore hard to define. The list includes travel and training, currency volatility, additional internal administrative costs and others.

To deal with all these challenges and manage your employees efficiently, each logistic organization needs a reliable software solution. Custom-made ERP systems enable company management to gain access to a single view of all current processes. According to the management needs, different kinds of reports can be generated. Customized report templates and non-redundant real-time data enables you to make strategic decisions on the go.

How ERP software can help your logistics company

ERP systems for logistics allow the elimination of redundant data and provide all required info in a real-time mode. Working in a rapidly changing world, it’s not enough to get access to data. It’s also important how fast you can make data-driven decisions. The ability to improve your business processes as soon as changes occur, you can avoid costly errors in production. Otherwise, you’ll have to deal with mistakes after they have been made which includes a lot of rework and decreased customer satisfaction. Furthermore, project tracking tools help to define the costs of each operation, increase the overall management efficiency, optimize the workflow and avoid underperformance.

With a tailor-made ERP software for logistics, you can get fast access to an enterprise-wide view of the required info. Many logistics companies use a complex “infrastructure” of software tools, each designed for the needs of a particular department or management team. Such an approach ends up with limited integration and low collaboration ability. Without having access to data which is centralized throughout the logistics organization, you won’t be able to track inventory and receive real-time information about your business’s supply chain. ERP systems designed in accordance with the features of your organization consolidate all of these software tools into a single system and provide a single view of all business processes.

Each department of your logistics organization has its own approach to the tasks management process. New members of an organization inherit systems and documents that they will change over time. Such state of things significantly complicates the interaction between the different teams. ERP systems for logistics allow the standardizing of procedures and documents which helps to create a facilitated information flow within a company. It enables you to reduce the time required for looking for the right contractor or supplier details. Instead of that, all your employees can focus on getting the job done fast.

ERP systems for logistics allow you to generate easy-to-read visual reports. Built-in templates help to create reports according to the audience for which they are intended. For example, you can create monthly general performance overviews to be demonstrated at your management meetings. ERP systems allow both the minimization of the time required to generate reports and the time needed to understand the represented data. Such at-a-glance real-time reporting allows for the making of data-based strategic decisions and a better understanding of your financial forecasts.

The main benefits of custom-made ERP software

At the very first stages of dealing with a custom software developer, you’ll cooperate with business analysts that will do their best to provide a software system to your business issues. One of the distinctive features of the custom-made software for logistics is that its functionality corresponds with each small user requirement. Client-oriented approach implies customer involvement in each stage of the software development process which helps to guarantee the best outcome.

Scalable architecture of custom-made ERP software provides various benefits. First of all, the logistics software that you use can grow with the growth of your business. If you entered a new market and increased the number of your employees, the ERP software that you use can adapt to changes in management with minimal effort. Another distinctive feature of custom-made logistics systems is their modular architecture. Software developers can only add those modules that you need right now and implement additional functionality as required. Such an approach allows paying just for the functionality that you need and eliminate excess costs.

If you’re already using a software solution for business processes management in your logistics organization and it completely satisfies you and your employees, there’s no need to stop using it. Many custom software development companies provide inexpensive integration with external systems. Therefore, instead of abandoning the usual order of things and spending time and money learning to work with the new system, the logistics software that you use can become an integral part of a brand new ERP solution.

Last but not least, the cost. An efficient and full-featured ERP system for logistics should include the following modules:

  • Delivery management
  • Delivery planning
  • Orders monitoring and management
  • Issuance of documents
  • Clients database management
  • ERP integration to communication channels

Let’s consider the cost of some of the most popular off-the-shelf custom solutions for logistics processes management that are available on the market. For the Sage 300 ERP, you’ll pay about $3,065 per user per year for the Pro version. Another significant player in the market is the SAP company. An ERP solution from SAP will cost you approximately $200 per user/month. A custom-made ERP system for logistics with all these modules included, in its turn, will cost you between $45,000 to $250,000. But the best part about this option is that you get a full-featured ERP system for logistics with all included modules in your full possession once and for all. Therefore, in the long run, the custom-made software can be considered as a more profitable investment.

Why adopt a custom ERP solution for your inventory management?

Inventory management is the part of logistics that should be considered separately. The process is entirely individual for each business that requires implementing features individually for a particular company. From this point of view, custom software development with its client-centric approach can guarantee a better outcome.

The constant growth of a logistics organization brings both new opportunities and additional challenges for any successful business. In such cases, custom software development is the approach that can guarantee painless adaption to the volatile business environment and growth of your company.

Conclusion

A constantly changing business environment creates the need for flexible management solutions. Logistics include dozens of continually changing indicators which, only through monitoring, can determine the success of your decisions. Therefore, the scalability of your chosen logistics software solution can be crucial. Custom-made ERP solutions initially designed in accordance with the business needs of a particular company can implement personalized and custom features for efficient business processes automation. Despite some seeming disadvantages such as long development time in comparison with the time required to adopt an off-the-shelf solution, custom-made software for logistics is profitable in the long run. In brief, custom-made ERP systems are easily integrated with the existing software that a company uses, can be upgraded painlessly, and have high scalability potential.

Sources

Custom-made vs. of-the-shelf comparison picture: https://xbsoftware.com/wp-content/uploads/2018/06/ERP-infographics_6-1.png

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