Your business’s USP or Unique Selling Proposition is a unique aspect of your business that provides you with a competitive advantage. This could refer to a feature of your product, a service aspect of your business, or a specific process that allows you to beat competitors and grow your customer base.
Sometimes your USP requires a specific piece of software or software customized to your business. However, before you jump into custom specifications and custom development, it is important to be aware of the downsides of custom software. Not only does custom software come with its own set of issues, but it can also encourage complex business processes and product development.
ERP Customization vs. Configuration?
Before we can explore the value and benefits of customization, it is important to understand the term configuration. You may have heard this term during software discussions with vendors but what exactly does it mean and how does it differ from customization? Understanding the differences and benefits between the two terms is crucial to determining if customization is necessary and can lead to significant cost and time saving, plus, having the most recent and updated version of the software.
ERP Configuration
With any true distribution ERP software, you can configure the system for your business. This means that you can set up the system for a designated task. Frequently, configuration can address 75-80 percent of your process needs without requiring any changes to the source code.
For example, software configuration allows you to:
- Turn on “flags” for specific actions such as customers over their credit limit, which prompts employees on what to do next
- Set up available order statuses based on workflows
- Automatically update a status, populate a field, email an employee, etc. based on certain criteria being met
- Setting up bank accounts and net receivable times
- Setting UDF values and notifications
- Creating user permissions, sales reps/commissions, etc.
ERP Customization
Customization entails modifying or adding features to a particular system to adhere to specific tasks. So, if a business decides to add on or modify features outside of the 75-80 percent of adaptable features through configuration, this is where custom work comes into play. Unlike configuration, customization typically involves making development changes to the system's source code.
Some examples of ERP customization could be custom workflows, unique data fields, and industry-specific modules.
Why Do Businesses Consider Customized ERP?
Businesses consider customized ERP solutions to address their unique processes and specific industry requirements that standard ERP systems cannot accommodate. Customization is critical for maintaining a competitive advantage in the wholesale and distribution industry by aligning ERP systems precisely with business operations, ensuring that all essential functions are met. Tailored ERP solutions enable businesses to integrate specialized modules and workflows that cater to industry-specific needs, such as landed cost tracking or lot control in food distribution.
How to Decide Between Customization and Configuration?
When starting the search for new wholesale distribution ERP software, one major consideration is whether to develop a custom-based application or find something out-of-the-box. While a custom system might seem like the best solution, there are significant drawbacks. As your business evolves, a custom system will require constant modifications and upkeep, which can be both time-consuming and costly. Additionally, support costs for custom software tend to be higher because maintaining the system requires expertise in your specific version. If the person responsible for this maintenance leaves the company or the partner you hired goes out of business, you could face significant challenges.
has evolved significantly over the years, reducing the need for custom work or compromising functionality. However, it’s unlikely to find a solution that caters to 100 percent of your unique business processes and needs. If you come across distribution software that can handle 80 percent or more of your business through configuration, you’re in a good position. This approach is not only cost-effective compared to a full-blown custom job but also simplifies system maintenance.
When a vendor releases an update, the migration process is usually seamless for software with little or no custom work. On the other hand, custom work requires more labor and time to implement upgrades, often leading businesses to opt out of updates due to associated costs and time, resulting in outdated systems.
It’s important to note that customization is not inherently bad—when done correctly, it can deliver significant value to your business. However, before opting for customization, you should consider how it affects future upgrades. Some vendors include all customization work in each version upgrade at no additional cost, while others charge significant fees for upgrading customizations. With the latter, you’re making a costly decision, as you’ll need to pay every time an upgrade is released.
When addressing specific needs, it’s often beneficial to start by exploring optional components or modules offered by your ERP vendor. Features such as advanced inventory tracking, CRM, Point of Sale, Sales/Budget Estimates, and Tax integration are often available as optional modules. These features, which have been tried and tested, can be enabled with minimal risk and without impacting the system’s upgrade process.
The good news is that the need for custom software is decreasing as technology evolves and vendors develop industry-specific functionality. Unique business requirements can usually be addressed through the configuration settings of software or through small custom projects, rather than building a system from scratch. Most businesses find that a combination of configuration, creative use of existing features, and small custom projects meets their needs effectively.
For wholesale distribution businesses, it’s best to start with an all-in-one system that includes built-in functionality for core processes such as accounting, order entry, processing, and inventory and warehouse management. These requirements are relatively consistent across companies. When you encounter specific needs, first check if they can be met through the system's configuration settings. Common examples of configuration include setting up bank accounts and net receivable times, creating user-defined fields to track certain information, setting up notifications like credit limit alerts, establishing user permissions, and configuring commission levels for sales reps.
If configuration alone doesn’t meet your needs, look to existing functionality within the system. Sometimes, existing features can be adapted or “misused” to meet unique business requirements. Only when neither configuration nor the creative use of existing features can achieve your goals should you consider custom programming. This approach minimizes risks and costs while still providing the flexibility to address your business’s unique needs.
Factors to Consider for Choosing Custom vs Out-of-the-Box ERP Software
1. Feature-Fit
There is no question that a custom system should be able to accommodate your specific business processes better – after all, it was designed specifically with you in mind – however, does that always make it a superior option? Not necessarily.
For instance, many businesses may discover that their unique processes are unique for a reason – they are not the most efficient or the best way to do things. Adapting business processes to a software package that works well for a given industry may introduce efficiencies that were not even considered to begin with. Conversely, though, changing good processes to fit the straight jacket of a software package can cause a loss of competitive advantages.
A flexible out-of-the-box system can employ minor customization to existing robust features to accommodate business process variations without having to start from scratch with costly development.
2. Flexibility
Flexibility varies greatly from system to system. Some ERP software systems are very flexible while others are rigid. Custom software, by its very nature, should be quite flexible but be sure you are not putting yourself in the hands of a single developer.
We often hear from businesses who are desperate to find an off-the-shelf solution after their sole developer retires, passes away, or ceases support for their custom system.
3. Support & Upgrades
Custom systems are typically built by a single individual or a small team as a one-off project, so support will vary. Because projects differ so greatly from client to client, each project is unlikely to be able to take advantage of development on other systems.
Out-of-the-box software, on the other hand, can pass advancements or customizations on to other customers via future upgrades and since the core functionality is common across customers, it is easier to support each customer.
4. Cost
Overall accounting, order entry, and contact management features tend to be similar across businesses in a given industry – so finding a software package suited to that industry means the vast majority of your needs are covered without a single line of new code being written.
Custom software, on the other hand, will typically have fewer bells and whistles and may be more expensive because most, or all, of the development is from scratch. For the sake of the evaluation, both solutions may be of comparable cost.
5. Time to Deploy
Out-of-the-box ERP software can take anywhere from 2-6 months to install (data migration, training, installation, etc.) whereas custom software has an indeterminate timeframe and will vary greatly from project to project.
It goes without saying, however, that custom software can be expected to take much longer to develop and implement.
Industry-Specific Needs or YOUR Needs
Depending on your industry, it can either be very hard or very easy to find software that is a great fit for you. Some industries are better represented than others but even in well-represented industries, there are many businesses with unique requirements that may pose problems for solutions that are designed from a “one-size fits all” perspective.
For example, consider software for wholesale and distribution – on the surface, wholesalers and distributors will share many of the same requirements. However, there are many different lines of business or sub-industries within wholesale and distribution with vastly different requirements. Those in the HVAC industry, for example may require servicing & repair management while those in food distribution may be primarily interested in landed cost or lot tracking.
Different modules offered by vendors can accomplish specific tasks required for specific industries, but even at the module level, there may be some functionality left to be desired. That is why customization should always be an important consideration when evaluating vendors. Regardless of how well the software works out of the box, you want to be assured that the vendor can accommodate your specific needs – now, and in the future when you make changes to your business/processes.
Although significant customization should be avoided (i.e. the software should do the majority of what you need it to), it should be considered a good option for the small pieces that are very specific to your business that set you apart from your competitors. After all, if this functionality were available out-of-the-box then it wouldn’t be unique to you, now would it?
Ensure that your software solution is customizable to avoid having to drastically change business processes to accommodate your software. Your options are to develop customized software specifically for your business (which can be very costly and often difficult to upgrade) or you can choose to find a software solution that is a fully integrated solution with the ability to be easily customized. Don’t focus on finding the right software for your industry, focus on finding the right software for YOU.
The Million Dollar Question: Is Your Business (In)Efficient?
Before deciding to invest in a heavily modified ERP system or to build an in-house ERP solution, businesses must first conduct a thorough assessment of their current processes to ensure they are truly efficient. This evaluation is crucial because ERP solutions have evolved around best business practices and are designed to enhance operational efficiency. Opting for a custom-built system without this assessment can lead to significant resource wastage only to realize that the inefficiencies lie within the business processes themselves.
Unless your business operates in a very niche market, it is safe to assume that there is an existing solution that can meet most of your needs. While it is true that there may be certain processes that require specific software tools, you could also be over-complicating processes based on old habits. This is especially true since most advanced software solutions will provide multiple ways to complete a process. If a business finds its processes and systems too unique, it could signal that they are not leveraging best practices. Engaging experienced consultants to examine and streamline these practices can reveal inefficiencies and help the business adapt to more effective methods.
Planning a Custom Specification
Assuming you’ve identified custom programming requirements that cannot be handled through configuration or existing features, there are certain best practices to help minimize the cost of custom programming and the amount of work and effort required to develop and maintain new features, and ERP implementation in general.
For starters, it is important to discuss the goal of the specific custom project at the beginning of the conversation with software consultants before getting into the execution or “how to”. Good software consultants will be able to help you design a solution based on their experience working with other businesses in the industry and using their understanding of how the wholesale distribution system works, and its capabilities. When you do start to design a custom specification, consider the following:
- Make sure to involve the end users when finalizing the spec – although management might have an idea of how the system should work, this is frequently different than how users actually interact with the software
- Make sure to review the spec in detail before you sign off to avoid unexpected surprises based on assumptions that were not documented in the spec which can cost extra to resolve
- Exhaust all possible standard processes and existing functionality before deciding to create a custom project – there might be an easier way to accomplish your goals
- Keep it as simple as possible to improve scalability and reduce upgrade costs
The 80% Rule and Configuration Over Customization
As a rule of thumb, it is always a good idea to try to find a business management solution that can address 75-80% of your business needs out-of-the-box. The other 20% can then be addressed through configuration, workarounds, or lastly, through customization. If you’re struggling to find a solution that can manage the 80%, it may be because you’re looking for the wrong system, or it might be time to adjust your expectations and processes.
This applies to whichever type of system you need – whether an accounting solution, CRM, or all-in-one ERP. Unless your business operates in a very niche market, it is safe to assume that there is an existing solution that can meet most of your needs. While it is true that there may be certain processes that require a specific set of software tools, you could also be over-complicating processes based on old habits.
This is especially true since most advanced software solutions will provide multiple ways in which to complete a process. Therefore, you can train employees on how to use the software in a specific way, as opposed to trying to find and customize a solution that provides limited tools.
This ties in with the MVP methodology. The idea is to find a system that allows you to operate business as usual, with the option to add additional features as needed down the road. At a minimum, you want to ensure employees can do 80% of their jobs using what is already included with the software.
Challenges of Over-Customization
Excessive customization in ERP systems can lead to significant challenges, including high costs, complex upgrades, and operational inefficiencies. Over-customization complicates software maintenance and makes it difficult to adopt new technologies or business processes, ultimately hampering long-term efficiency and scalability. In contrast, configuration strikes a balance between flexibility and maintainability, allowing businesses to leverage built-in functionalities to meet their needs without extensive custom development.
For instance, a food distribution company reliant on outdated custom software transitioned to a modern, configurable ERP solution. This shift enabled them to streamline operations, reduce maintenance costs, and adapt more easily to technological advancements. By focusing on configuration and limiting customization to truly unique business requirements, companies can manage the risks associated with over-customization and ensure sustainable growth and efficiency.
Planning for the Future: Adaptability and Upgradability
Future-proofing ERP systems is crucial for ensuring they can handle business disruptions and technological advancements. Long-term success hinges on the ability to upgrade and adapt ERP systems without significant operational disruptions. While customization can address specific business needs, it often hinders future upgrades and creates maintenance complexities. Conversely, configuration provides smoother transitions and greater adaptability, allowing businesses to maintain system efficiency and embrace new technologies.
Maintaining Custom During Upgrades
One of the biggest concerns with customizing any software solution is managing upgrades. Will the custom be reapplied when receiving software updates or does it have to be reprogrammed? Are you able to upgrade your existing version and all custom without having to pay extra? These are important questions to ask whatever wholesale distribution software vendor you choose as the answer tends to vary across industries and between vendors.
In the past, businesses were able to get away without upgrading systems regularly, and some companies were able to get by using legacy systems. However, software updates are even more important in today’s fast-paced environment as technology continues to evolve at a rapid pace, and using outdated software is becoming less cost-effective for all parties involved.
Consider the fact that with an outdated wholesale distribution system built on old technology, a simple issue might end up taking several hours to resolve as the software vendor tries to
- Get the old version installed on a computer
- Load the old development tools
- Try to free up a developer who still remembers how to work with those old tools
- Work on the issue in question.
Not to mention the fact that many operating systems such as Microsoft and Apple do not support old versions of technology at all. Therefore, custom programming and how to upgrade your system must be a part of the same conversation.
Adaptability to External Factors
An important consideration when deciding to customize or not is the potential for things to change down the road. Not just your business processes and strategic goals, but also other changes such as:
- Technology changes
- Government regulations
- International trading rules
- Competitor offerings
- Customer/target market needs
- Reporting requirements
- Environmental/economic changes – think of COVID-19 as an example
- Opportunities to increase efficiencies, etc.
When internal and external factors change – most of which are out of your control - your custom software will no longer work leaving you to either develop new custom or find a new solution. Neither of which is an ideal fix.
The Drawbacks of Old Custom Software
Surprisingly (or maybe not!), some companies go on using very old, customized accounting and inventory management software - mostly dating back to before we started using the term "ERP Software".
These companies are still using the same software, sometimes 20 years older (or older), because it was customized for them back then, they are accustomed to how it works and what it does, and they've not found any current software that works the same way. They are loath to customize any new software system because that's what got them into this situation in the first place - once customized, their old software could not be upgraded to a newer version.
A reality check will tell them that, aside from the customized features they rely on, they are losing so much in terms of productivity and efficiency by clinging to 20-year-old software, developed before many now commonplace features existed - such as emailing documents and reports, workflow automation and access to all kinds of information in real-time.
Some modern accounting and business software packages are now customizable with full upgradeability. So why would a business owner persist in using an ancient system, which is probably supported (if at all) by one very part-time person?
