As enterprises grow over reliance on Excel spreadsheets, especially for planning, operational and financial controls becomes problematic.
Microsoft’s Excel will celebrate its 40th Anniversary in 2025. It’s still used by many $-billion businesses and for the majority of startups and small businesses, Excel is successfully used to meet their day-to-day operational management needs. It is undoubtedly a powerful and versatile tool that can be used for many purposes, especially for collecting and analysing relatively small data sets. For buyers, sellers and carriers, simple data-tables are very useful information capture and communication tools and commonly used across many industries. For small and localised functional teams, spreadsheet based modelling and reporting are the most popular management tools.
(Top 10 Uses of Microsoft Excel in Business)
However, as enterprises grow over reliant on them, especially for supply chain planning, operational and financial controls become problematic. The majority of issues fall into two main categories:
1. Manual development, updates and maintenance
Building and maintaining a complex spreadsheet model can be challenging for a number of reasons. Excel is not designed for data management or analysis on a large scale. As the amount of data increases, it becomes more difficult to manage and manipulate, leading to slower performance and it becomes virtually impossible to transfer the know-how from its creator to another member of the team. In addition, Excel's lack of data integrity rules and support for multiple users can make it difficult to maintain a consistent and accurate model across collaborating colleagues and cross-functional teams. Furthermore, Excel's limitations in terms of analytical capabilities can make it difficult to build models that accurately reflect the complex relationships and scenarios that often exist in real-world data. This can lead to inaccurate or incomplete insights, and can make it difficult to forecast and plan for the future.
Overall, building and maintaining a large and complex Excel model requires a significant investment of time and effort, and is often not the most effective solution for data management and analysis.
2. “Unacceptable” amount of errors
A study by the University of Hawaii found that “errors in spreadsheets are pandemic.” The study declared, “In general, errors seem to occur in a few percent of all cells, meaning that for large spreadsheets, the issue is how many errors there are, not whether an error exists.” Since the average spreadsheet contains thousands of information-bearing cells, a “few percent” may translate into dozens of errors.
In many non-critical applications, these errors may be considered a reasonable tradeoff for the affordability and ease of use offered by spreadsheet software such as Excel. However, when they result in serious miscalculations in your supply chain, the costs to your organisation can be devastating, such as when those errors are used in KPIs and other analytical formulas for subsequent decision making. For instance, a miscalculation in the quantity of a key supply component can produce a domino effect in which assembly of the final customer order is delayed. This could cause a vendor to miss supply deadlines, resulting in lost margin from penalties, rush shipping charges and damage to the company’s reputation.
As the University of Hawaii study concluded, “All in all, the research done to date in spreadsheet development presents a very disturbing picture. Every study that has attempted to measure errors, without exception, has found them at rates that would be unacceptable in any organisation.”
In conclusion, while Excel may be a convenient and affordable solution for basic data management and analysis, it has its limitations. As an organisation grows and its needs become more complex, those limitations become more apparent.
To determine if your business has outgrown Excel, consider polling current users and asking if they believe their processes are efficient and whether they feel it's time to upgrade to a more capable software.
Some indicators that your supply chain and logistics management operations may have outgrown Excel include:
- Long lists of customers and complex conditions that are difficult to manage with spreadsheet software.
- Multiple users accessing and making changes to Excel spreadsheets, leading to version control issues and potential errors.
- The need for real-time data tracking and analysis to manage inventory and demand.
- The requirement for advanced analytical capabilities, such as forecasting, modelling, and scenario planning.
- The desire to improve process control and gain insights into process improvements.
- The need to safeguard critical process knowledge and prevent it from being lost with key individuals.
- The desire to extend processes into other departments or external partners and the need for scalable software to support this.
- The need for specialised supply chain software to gain insights into your processes and improve efficiency.
(Stop Using Spreadsheets to Manage Your Supply Chain)
Timing is everything, and the window to move to a suite of advanced supply chain management solutions is now
The rise of globally connected multi-enterprise supply chains and the era of unprecedented disruption have highlighted the need for organisations to realign the foundations of their businesses. In order to survive and thrive, companies must move away from outdated processes and technology that have led to silos and slow responses.
Spreadsheet-based supply chain management is no longer sufficient in today's fast-paced and ever changing environment. To remain competitive, businesses must adopt technologies that enable agility, concurrency, and alignment across their entire supply chain network. This means moving away from outdated tools like spreadsheets and embracing more advanced and comprehensive “digital supply chain” solutions.
(Check out FLOX, the On-Demand Supply Chain Orchestration platform)