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Custom Software vs. Off-the-Shelf Solutions for Logistics and Transportation Custom Software vs. Off-the-Shelf Solutions for Logistics and Supply Chain: Which to Choose?

Custom Software vs. Off-the-Shelf Solutions for Logistics and Supply Chain: Which to Choose?

Oct 18, 2024

15 mins read

The Customer Confidence Index is showing unusual volatility from month to month, making it harder for supply chain businesses to predict demand and plan accordingly. Current geopolitical challenges and poor communication and coordination across suppliers, manufacturers, and logistics providers add even more complexity.

This heightened volatility, changing customer behavior, and growing competition are forcing logistics companies to reassess their business models and figure out how to retain or increase their market share. According to Accenture, 83% of logistics executives feel threatened by digital service providers and start-ups offering end-to-end visibility across the supply chain. With customers increasingly demanding it, 43% of logistics companies fear becoming acquisition targets if they don’t invest in expanding their offerings.

Investing in modern technologies can help supply chain companies keep up with the tides and tackle the challenges facing the market. Yet, the question remains:

Should your business choose an off-the-shelf software solution?
Or is it better to invest in custom logistics software development tailored to your needs?

In this article, we’ll compare both options, highlight their strengths and weaknesses, and explain in what cases they are most applicable. By the end of the article, you will better understand which approach best suits your business needs.

But let’s start from the basics.

Why You Need Efficient Software Solutions in Logistics

The Accenture survey of more than 800 logistics executives revealed that customers have clear expectations from logistics companies: they want greater transparency, improved reliability, personalized experiences, and comprehensive, end-to-end services. Fortunately, adopting a high-quality logistics software solution can tick all those boxes.

Let’s look at the benefits logistics and supply chain companies can get by adopting modern software solutions.

Benefits of investing in logistics and supply chain software
Benefits of investing in logistics and supply chain software

Improved operational efficiency through automation

According to Statista, 60% of organizations worldwide expect robotic process automation (RPA) to have a major or moderate impact on supply chains by 2025. RPA can significantly boost productivity and efficiency across the supply chain when integrated correctly.

The 2024 Tech Trends report highlights this point, stating that companies can significantly reduce their expenses by adopting automation through up-to-date logistics and supply chain management software. The report states that routing and sourcing raw materials, demand forecasting, and inventory tracking can be fully automated. This, in turn, can reduce human errors and increase your company’s operational efficiency.

Better transparency and visibility

McKinsey reports that adopting real-time transportation visibility platforms has become one of the most common strategies for shippers and carriers to reduce waste and enhance visibility across their logistics chains.

Achieving a 360-degree view of all supply chain processes is possible through interconnected cloud-based management systems. They can give you the ability to better monitor and track the movement of goods through the supply chain and make more accurate forecasts. That’s one of the reasons why the market for visibility solutions has been quickly expanding, with startups in this sphere attracting around $7 billion in funding since 2022.

Better transparency also helps companies identify unnecessary processes or underused equipment and eliminate them in their operations. For example, route optimization software we developed for a Nordic waste container management system gives company clients insights into container usage and filling levels. This information helped them reduce the number of bins required, resulting in financial savings of up to 35-40%.

Cost reductions

Rising fuel costs, salary increases, and fluctuating material prices negatively affect logistics and supply chain companies’ bottom lines. In fact, 38% of logistics companies struggle with driver retention, and 40% significantly raise wages to meet this challenge.

Fortunately, adopting advanced technologies through supply chain management software can help companies mitigate the impact of these rising costs and, in many cases, even reduce them.

E&Y states that early adopters who have implemented AI in logistics have already achieved remarkable improvements, including a 15% reduction in logistics costs, a 35% optimization in inventory levels, and a 65% enhancement in service levels. These reductions become possible thanks to the adoption of smart technologies like route optimization software, predictive analytics tools, automated warehouse management systems, and demand forecasting algorithms.

Streamlined management

According to the State of Last Mile Logistics report, 41% of logistics providers identify managing multiple carriers as a central pain point, and 18% claim it is a significant barrier to efficient last-mile delivery. This challenge is even more severe in North America, with 25% of logistics providers naming it a top blocker.

Cloud-based logistics management software can help you minimize the chances of miscommunication or errors by centralizing the coordination of multiple carriers within a single platform. Custom supply chain software can integrate with your logistics providers, allowing you to book shipments, track deliveries, negotiate rates, and handle documentation within a single platform.

Increased revenue

Despite initial expenses, investing in supply chain technologies can positively impact your company’s revenue growth. In fact, 80% of companies that invested in supply chain technologies increased their revenue in the same year. Additionally, 81% of companies reported that their investments led to broader business improvements within 24 months. This growth can be attributed to several key factors, including better inventory management, automation of manual processes, and optimized resource allocation.

A recent survey conducted by the IBM Institute for Business Value among 2,000 supply chain executives found that companies that adopt innovative technologies (approximately 10% of respondents) achieved 34% more revenue growth and an impressive 326% increase in profitability over the past three years compared to their peers. So, despite the initial investments, implementing supply chain technologies drives significant revenue growth and operational improvements and can quickly pay off.

Easier compliance with ESG regulations

The demand for green logistics has been growing steadily. However, the challenge to meet net-zero targets still remains. Fortunately, technology offers a path forward. McKinsey shows that adopting advanced technologies can result in 40-50% reduction in logistics emissions by 2030. Tools like AI-powered route and load optimization software and backhaul matching can cut down fuel consumption, reduce waste, and lower overall carbon footprints.

Logistics and supply chain management software can also help track emissions more effectively. This makes it easier for companies to monitor and report their environmental performance, which is a key aspect of ESG compliance.

Data-driven forecasting

Many companies in the supply chain still rely on manual forecasting, thinking that AI requires better data quality than they have. However, choosing the right AI model and incorporating external data APIs (e.g., weather or traffic) can significantly enhance forecasting accuracy.

According to McKinsey, applying AI-driven forecasting in supply chain management can reduce forecasting errors by 20-50% and lead to operational savings. For instance, warehousing costs can fall by 5-10% due to more accurate inventory management.

Additionally, data-driven forecasting can improve your company’s resilience since you’ll be better prepared for seasonal demand fluctuations and so can react accordingly.


While the benefits of investing in logistics software are clear, the question still remains: should you choose an out-of-the-box logistics solution or invest in tailor-made software?

Off-the-Shelf vs. Custom Software in Logistics and Transportation
Off-the-Shelf vs. Custom Software in Logistics and Transportation

Pros and Cons of Adopting Off-The-Shelf Logistics Solutions

Commercial off-the-shelf (COTS) solutions are pre-built software applications designed to meet the general needs of logistics and supply chain businesses. These solutions come ready to use right out of the box, offering a variety of features or modules that can be quickly implemented, either as part of a package or for an additional cost.

Pros of adopting off-the-shelf logistics solutions:

  • Speed of implementation. COTS solutions are pre-built and can be quicker to deploy, especially when you plan to use their standard features. This makes them ideal for supply chain businesses that need to quickly fill gaps and address immediate operational challenges.
  • Cost-effective initial investments. Adopting out-of-the-box software generally costs less upfront compared to custom development. This makes it an attractive option for small businesses with straightforward processes and limited budgets.
  • Test-and-try option. Before buying any off-the-shelf solution, you often have the opportunity to test it through free trials or freemium versions. This allows you to evaluate the software’s capabilities and ensure it meets your needs before making a financial commitment.

Cons of choosing off-the-shelf logistics software:

  • Limited customization. While COTS solutions are designed to cater to a broad audience, they may not fully align with the specific needs of your supply chain business. This can force you to modify processes to fit the software rather than having it tailored to suit your needs. Additionally, limited customization options might require you to use several different solutions, which can be challenging to integrate seamlessly (mainly if they belong to other vendors).
  • Unnecessary features. Off-the-shelf solutions usually offer a wide range of features, some of which your business may not need. Despite this, you may still have to pay for unnecessary features or modules that are often bundled into off-the-shelf solutions or software packages. These unnecessary features can also complicate the user experience.
  • Integration difficulties. While off-the-shelf solutions may offer some standard integrations, in most cases, they are not enough for logistics processes, which often require specialized, industry-specific connections. The presence of numerous established standards in logistics (such as EDI, custom APIs, GS1, and DSCA) makes seamless integration a complex task. This complexity might lead to data silos or the need for costly custom development turnarounds to ensure interoperability. In the end, the initial cost savings of an off-the-shelf solution can be offset by these additional integration expenses.
  • Limited flexibility in deployment and hosting. While off-the-shelf solutions are typically designed with scalability in mind, they often offer less flexibility when it comes to deployment and hosting options. You might be locked into specific platforms or configurations, making it difficult to tailor the solution to your unique operational needs or infrastructure. This lack of flexibility can restrict your ability to optimize performance, control costs, or adapt to changes in your business environment.
  • Vendor lock-in. When using a COTS solution, your business becomes dependent on the vendor for updates, support, and feature enhancements. This reliance can limit your flexibility, as you have little control over the timing or content of these updates. Additionally, vendor updates can sometimes conflict with existing customizations. After updates, custom integrations or adjustments may need to be reconfigured. This may add extra costs and potential delays to ensure that everything continues working as expected.
  • Rising prices. Relying on vendors also limits your flexibility and can expose you to unpredictable pricing changes. For example, a license that costs $200 per user in one year may increase to $220 the next, which can significantly impact your budget if you have a large number of users. Over time, these incremental price increases can add up, creating financial pressure on your organization.

When to choose off-the-shelf logistic solutions

Ready-made supply chain management solutions can work well in several use cases. They can be a perfect choice for your business if:

  • You need a basic solution to kickstart your supply chain operations
  • Your company’s processes are more or less straightforward and don’t require heavy customization.
  • Your logistics operations are not expected to scale significantly in the near future.
  • You lack the internal resources to maintain a solution on your own and prefer a platform that requires minimal IT support.
  • You need logistics software that doesn’t require specialized or complex integrations.

Despite the potential drawbacks, commercial off-the-shelf solutions can be a good choice for businesses with straightforward processes that need a solution with lower upfront costs and faster implementation. They are particularly well-suited for small or medium-sized businesses that need to implement a solution quickly and require minimal customization. However, the total cost-effectiveness depends on how well the solution aligns with your needs, as paying for unnecessary features or facing ongoing licensing increases can diminish the initial savings.

Pros and Cons of Developing Custom Logistics Software

Custom logistics software is specifically designed to meet the unique needs and requirements of a particular business or organization. Accenture states that 48% of logistics companies are building their own custom software to become end-to-end service providers. No wonder since custom software can be designed to support unique business processes and include only those features you need.

Pros of custom logistics and supply chain software development:

  • Tailored to your company’s needs. Many logistics and supply chain companies rely on several tools, such as ERP systems, warehouse management systems, or transportation management systems. Custom software can be developed to work with your current infrastructure, ensuring data flows smoothly between different platforms and departments.
  • Scalability. When developing custom supply chain software, you can set up the required scalability from the start. This would ensure that your system continues to support your business rather than becoming a bottleneck as demands increase.
  • Competitive advantage. Investing in custom software allows you to create a solution specifically tailored to solve market problems or cater to your business processes. According to Deloitte, using advanced technologies offers new entrants, retail giants, and cloud service providers the potential to beat current logistics leaders. In fact, nearly 60% of respondents believe these new players are best positioned to make significant progress by 2030.
  • Greater flexibility. Investing in custom logistics software solutions gives you greater flexibility in terms of features, updates, and integrations. Given that many supply chain businesses rely on several tools, custom software allows setting up proper integrations between them to avoid data siloes.

Cons of custom logistics software development:

  • Higher initial costs. Custom software development is typically more expensive upfront compared to off-the-shelf solutions. However, in the long run, the tailored nature of the solution means that it can significantly reduce your business’s operational inefficiencies and eliminate the need for costly workarounds.
  • Longer development time. Developing a custom logistics solution can take more time than adopting an off-the-shelf product. The timeline covers requirements gathering, design, development, testing, and deployment. For businesses in need of a quick fix, this extended development period might impact business operations.
  • Maintenance and support. Once the software is developed, you are responsible for ongoing maintenance, updates, and support, which can add to the overall cost. However, unlike off-the-shelf solutions, where you depend on the vendor’s schedule and priorities, custom software allows you to prioritize updates that are crucial to your business.
  • Security and compliance. If you’re developing your custom software, there are security and compliance risks to consider. Without proper expertise, it’s easy to overlook critical vulnerabilities, potentially leading to breaches or hefty fines.

As you can see, custom software development pushes your business to rely on the development team for both initial creation and ongoing support. If this team is internal, it may require continuous investment in skills and training. If outsourced, there’s a risk of losing access to the team’s expertise if the partnership ends. However, establishing a solid relationship with a reliable software development company can mitigate this risk, ensuring you have the necessary support to maintain and evolve the software.

When to choose custom software development for logistics and supply chain operations

Custom software development takes time, but the long-term value of the software can quickly pay off thanks to a better alignment with business goals.

Choose custom software development when:

  • Your supply chain operations require highly specialized workflows that off-the-shelf solutions can’t support
  • Your business also relies on other tools and requires custom integrations
  • You need seamless integration with various third-party systems, legacy platforms, or IoT tools.
  • Your operations are spread across multiple regions with differing regulatory requirements, and you need a custom solution to ensure compliance.
  • You are pioneering a new logistics or supply chain management approach requiring unique software to back your operations.

While the cons of custom logistics software development may present challenges, they are often manageable with the right development team and approach. So, if your logistics business requires a solution that precisely fits your operations and can evolve with your needs, investing in custom software could be the strategic move that sets you apart from competitors.

Off-the-shelf solutions
Custom software development

Cost

Lower upfront costs
You pay for the out-of-the-box features you don’t use
You may require an extra budget for customization & integration
The price of the license from the vendor may grow over time

Higher initial investment

Implementation time

Quicker start

Longer timeline

Customization

Limited customization
May require adapting business processes to fit the software

Built to meet the specific needs of your business

Feature set

Comes with a broad range of features, some of which may be unnecessary

Includes only the features you need, designed according to business requirements

Support and maintenance

Vendor-provided
No control over updates

In-house or outsourced
Greater flexibility and control

Risks

Vendor lock-in

Suboptimal development decisions

Time to value

Immediate, as the software is ready to use

Longer due to development time, but potentially higher ROI and TCO

Making the Right Choice for Your Business

The complexity of today’s logistics operations requires a strategic approach to software selection. While off-the-shelf solutions offer quick deployment and standardized features, they may not fully address the unique and evolving needs of your business. These solutions often come with limited integration capabilities, forcing companies to compromise on functionality or invest in costly workarounds as their requirements change.

Custom software development, on the other hand, offers a more tailored approach, providing solutions that align precisely with your operational demands. It gives you the flexibility to adapt and grow, ensuring that your logistics operations remain efficient and competitive.

With a trusted partner like Leobit, you can navigate the complexities of custom software development, ensuring that your logistics operations are not only equipped for today’s challenges but also can scale with your future growth. Contact us, and we’ll gladly consult you further on the topic.

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Artem Matsa | Business Development Director