Mar 15, 2016
The hidden costs of using spreadsheets to plan your inventory
The vast majority of businesses use spreadsheets to do all or part of their inventory forecasting, planning, and purchasing. Even large businesses with very expensive ERP systems resort to extracting and manipulating data in order to generate forecasts, compute inventory levels, recommend orders, and track outstanding deliveries.
Excel has become the “tool of choice” because anyone can build a spreadsheet, populate it with data, and get an answer. Most people have used Excel to varying degrees; they feel confident building calculations with complex formulas, and they can easily disseminate information via email or shared drives.
The selection of Excel for planning inventory is driven by:
- Its ease of use and availability
- The familiarity most of us have with Excel
- The ability to create fairly complex calculations
- The lack of functionality in your ERP system
- The difficulty in using the functionality in your ERP system
- An unwillingness to understand and use the functionality available
Whatever the reason(s) for your business selecting Excel as your “planning tool of choice”, there are some hidden costs associated with its use that you need to make sure you are aware of. These include:
- The risk associated with having one master of the spreadsheet: one individual who builds, extends, customises and populates the spreadsheet
- Ensuring accurate and consistent data drives the spreadsheet, to minimise the risk of expensive mistakes
- A level of sophistication in the computations so that optimal inventory levels are used to drive purchasing, resulting in the highest level of service to customers with the lowest possible inventory value
- Incorporating supply chain complexity, including central warehouse structures, bills of materials and supersessions
We're only getting started
In the coming weeks, be sure to return to The Inventor Mentor blog for more in this series on how Excel spreadsheets are hurting your business. Coming up, we’ll be highlighting:
- The risks of spreadsheets in terms of time and money
- The pros and cons of spreadsheets vs. Inventory Management Systems
Written by Barry Kukkuk
Barry comes from a systems architect and application development background. He started his career as the co-founder and chief developer for Icon Retail Management, a full-fledged retail management system that integrated with mainstream ERP. Barry later conceptualized and developed Inventory Optimiza for Barloworld Logistics and provided technical support for the application. It was here where Barry’s passion for Inventory Management solutions began and the industry where he would later return. Barry went on to start his own business in 2008, where he was an avid user of cloud-based apps and would only use online solutions for his business. In 2010 Barry began his journey with NETSTOCK. His enthusiasm for Inventory Management and his strong belief in “all things Cloud” collided, and we saw the release of the Inventory Management solution - NETSTOCK. Barry is the CTO at NETSTOCK, where he is responsible for all customer-facing technologies and systems that keep thousands of NETSTOCK customer instances working correctly.