3 Reasons to Stop Using Excel For Inventory
After 27 years in business, it never ceases to surprise us how many companies are managing their inventory in Excel (using inventory spreadsheets). The fact they are using spreadsheets doesn’t surprise us… small businesses with simple manufacturing or distribution needs can do quite well and save a fortune with OTS software. What surprises us is how growing SMEs will often continue trying to make Excel work for them, long after it has outlived its utility.
So why not use a spreadsheet?
If your inventory can fit in a garage and you don’t plan on growing very much, then spreadsheet inventory management might be the perfect solution for you. But most likely, those spreadsheets are pointing you straight at a brick wall.
Microsoft’s Excel is a powerful program which allows a user to build custom spreadsheets with highly complex calculations and almost infinite functional utility. It is most often used by financial professionals to model projections, among other things. But its a spreadsheet, not an inventory management application.
Manual data entry – Did you make a sale? Enter it in Excel. Did you place an order from a vendor? Enter it in Excel. Did you assemble components into a widget? Don’t forget to enter that into excel; manually increasing your widgets on hand and reducing your components on hand. Inventory management in Excel means that you have to remember to manually track each and every transaction that affects your inventory and if you overlook something or lag behind, you will not have an accurate picture of the present state of your inventory. Even worse, you may make errors that lead to increased costs or failures/delays to deliver on sales. If you have multiple warehouses, locations or vendors, the complexity rises; as does the likelihood of mistakes.
Limited user access – This is when a lot of our new clients call us: it is nearly impossible to manage inventory in a spreadsheet when you are dealing with multiple locations. Using an Excel workbook to manage your inventory means that you will only have the ability for one user to enter data at a time. So in additional to multiple-location issues, your sales manager will be using the same file as the warehouse manager, your accountant and book-keeper, and only one of them will be able to edit the workbook at a time. This reduces the ability for each manager to have a real time inventory picture and further increases the likelihood of errors. Worse, if the production manager is busy and hasn’t had a chance to update the inventory database, your sales team may promise sales that are impossible to deliver on time.
Efficiency Losses – If you are managing your inventory in Excel you are wasting hours every week manually entering data and personally analyzing your inventory situation. You could hire an Excel guru to build a custom inventory management tool in Excel but what works for you right now may not work for you in a few months. New vendors, products or components would require further modifications to the tool and necessitate further Excel guru expenses. You would be dependent on an expensive consultant for any business changes and would still suffer from the other limitations discussed here; like manual entry and single-user utility.