Cost VS Benefit: Analyzing the ROI of Amazon Order Management Software

High competition in eCommerce, especially in marketplaces such as Amazon and eBay, means that all the back-end activities must be synchronized to provide customers with a positive experience. Factors help businesses choose whether to use full/custom order management software or subscription-based software.

Order management is one of the most important core functions for any eCommerce business since it relates directly to any business’s bottom line. This is where order management software (OMS) comes into the picture. It assists in automating workflows, error elimination, and meeting customers’ increasing expectations.

This blog post will analyze the cost versus benefit of investing in Amazon-specific OMS, focusing on how owning an in-house solution has more benefits than renting or subscribing to software orbitals.

The Role of Custom Order Management Software (OMS)

At its core, custom order management software is designed to simplify and optimize the entire order lifecycle. Everything is managed and tracked effectively, from the order placement to the order delivery. 

Instead of manually handling orders at each stage-processing, tracking, and shipping, a single software automates the whole process, ensuring that orders are processed promptly, stock levels are updated automatically, and customers receive their purchases as expected. 

Order management software does much more than save time; it actively helps reduce errors when managing orders by hand. Mistakes in order processing can lead to incorrect shipments, delays, or even missing items—all of which damage a company’s reputation.

End-to-End Order Process Management

• Order processing and tracking
• Shipment creation and fulfillment
• Inventory synchronization
• Integrations management

Analyzing the Cost VS Benefit for Amazon Order Management Software

Suppose a company dealing with 500 orders daily can opt for a subscription or rental software for a specific fee, and limited features go well. Such businesses investing in custom order management will not be the right choice. Unlike an eCommerce store dealing with more than 5000 orders in a day, if they opt for rented software, it would add to their annual expenses without satisfactory outcomes. 

Handling such bulk orders manually is a time-consuming process, and a robust custom order management system built around the specific rules and formulas of the marketplace automates the whole process.

Investing in a custom-built order management system can yield significant long-term benefits, but to fully understand its value, it’s essential to break down the cost vs. ROI in detail. Below is a comprehensive analysis of the key factors to consider when evaluating the ROI of developing a custom Amazon order management system compared to subscription-based or off-the-shelf solutions.

Development Cost Division: Custom-Built vs. Subscription-Based Models

One of the primary considerations when investing in an OMS is the upfront development cost. Building a custom OMS involves a one-time cost that typically includes design, development, integration, and testing. This is contrasted with the ongoing subscription fees charged by SaaS-based or off-the-shelf OMS solutions:

A. Custom OMS

The cost of building a custom OMS is likely higher, but it is a once-off cost. The software’s potential is entirely directed to your business’s specific requirements, meaning total flexibility in terms of what features can be included, what integrations are available, and how you can scale. The solution where you pay every month is likely high in the long run, whereas the custom solution is more economical.

B. SaaS OMS

The traditional model of SaaS-type OMS solutions shows that one pays per order processed or by the number of users and additional functionalities. For instance, if your order volume increases, the fees payable shall also increase monthly or yearly. You might also have extra costs for increased user limits or paying for high-end functionalities your business needs as it expands. The initial investment may appear reasonable, but I must warn you that it could get rather costly as your company expands.

For Example, A small eCommerce business might pay $200 monthly for a SaaS OMS with limited users and basic features. However, the monthly fee could quickly jump to $1,000 or more as the business grows and processes more orders. Over a few years, these recurring payments can be much higher than the one-time cost of developing a custom OMS.

Direct Cost Factors

1. Licensing Fees

• Custom OMS: Depending on the ownership model agreed upon with the developer, custom software typically requires a one-time licensing fee or no fee. The software is yours to use and modify as needed, which provides long-term cost savings, especially for growing businesses. Integration with other systems like CRM or ERP platforms can also be built into the initial development, eliminating the need for separate integration costs later.
• Saas OMS: Off-the-shelf and Saas-based solutions charge recurring licensing or subscription fees. These fees may cover basic functionality but often require additional payments for premium features or add-ons such as third-party integrations. This leads to an unpredictable cost structure as your business evolves.

2. Maintenance and Support

• Custom OMS: Maintenance and support are usually agreed upon upfront with a custom solution. Businesses can plan for ongoing costs like software updates, bug fixes, and security breaches, but these are typically minimal compared to subscription fees. Custom support agreements also allow for tailored, priority support whenever needed, which can prevent potential disruptions.
• Saas OMS: Saas models often come with built-in support as part of the subscription fee but may lack flexibility. Support may be limited to certain liers, and troubleshooting or adding new features may require purchasing additional service packages.

Indirect Cost Factors

1. Employee Training

Employee training is necessary to ensure the team can use the software effectively. Implementing any new OMS, both custom and SaaS-based solutions, will involve an initial cost of time and resources to train employees.

2. Downtime Costs

Software implementation or migration can cause downtime, leading to potential sales or order fulfillment disruptions.

• Custom OMS: There may be a one-time implementation period with downtime during migration. However, custom solutions are built to integrate smoothly with your existing processes, minimizing long-term disruptions.
• Saas OMS: While more straightforward to implement initially, subscription-based systems may experience ongoing updates or technical issues beyond your control, leading to unanticipated downtime and sales interruptions.

3. Customization

• Custom OMS: One of the most significant advantages of a custom OMS is its ability to grow with your business. You can build the exact features you need and adapt the software as your business operations evolve. Whether you need advanced order routing, multi-channel integrations, or workflow automation, a custom OMS can handle it without additional charges.
• Saas OMS: Most SaaS solutions offer limited customization options. As your business needs change, you may need to purchase higher-tier plans or additional modules to accommodate these changes, leading to increased costs over time.

Order Management Software: Impact on Key ROI Metrics

Order Fulfillment Time

A well-designed OMS can drastically reduce order processing time. By automating key tasks such as order entry, fulfillment, and shipping label generation, businesses can ensure faster deliveries and improve customer satisfaction.

• Custom OMS: Custom solutions can be tailored to maximize efficiency, potentially reducing order fulfillment time by 30-50%. This leads to faster deliveries, fewer customer complaints, and increased positive reviews.
• SaaS OMS: SaaS solutions also reduce order fulfillment time but may offer a different level of Customization or automation than a business needs for its specific processes.

Reduced Errors

Manual order processing can lead to errors such as incorrect shipments, duplicate orders, or inventory discrepancies. OMS solutions help minimize these mistakes.

• Custom OMS: With features designed specifically for your operations, a custom OMS can significantly reduce the chance of errors, leading to fewer returns and refunds.
• SaaS OMS: While SaaS solutions also help reduce errors, they may lack the tailored features needed to fully eliminate problems specific to your business model.

Revenue Impact

Improved efficiency and fewer errors translate directly into higher revenues. Customers are likelier to repeat purchases from businesses that offer quick, accurate, and reliable service.

• Custom OMS: As custom solutions grow with your business, they offer long-term revenue benefits through better customer retention and reduced operational costs.
• SaaS OMS: Subscription-based systems can still provide revenue benefits, but the incremental costs of scaling the system may affect your profit margins as your business grows.

Operational Savings

A key benefit of Order Management System is the ability to reduce manual labor and associated costs. Automation allows employees to focus on value-added tasks rather than mundane, repetitive work.

• Custom OMS: A custom OMS can deliver significant operational savings over time by automating business-specific workflows. Customization ensures that you’re only paying for features your business truly needs.
• SaaS OMS: SaaS systems offer operational savings, but the lack of deep Customization may mean some tasks still need to be handled manually, leading to inefficiencies.

Investing in Amazon OMS: Worth it or not?

Investing in a custom Amazon OMS for growing eCommerce businesses is undoubtedly worth it. While the initial cost might seem high, the long-term benefits of operational savings, revenue growth, and customer satisfaction far outweigh the investment. Custom solutions offer flexibility, scalability, and a tailored approach that subscription-based software can’t match.

The decision should be based on your business size, order volume, and growth projections. A custom OMS can significantly boost ROI in the long run if your business is scaling and requires specific features to handle a high volume of orders.