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 by business owners. It is undoubtedly a powerful tool that can be used for many purposes on a daily basis, 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.
However, as enterprises grow over reliant on them, especially for supply chain planning, operational and financial controls become problematic. Before we dive into the challenges that come with the spreadsheet program, we'd like to give a unbiased view looking at the positive aspects first.
The Pros of Excel in Supply Chain Management
Microsoft Excel, as a competitor to Google Sheets, boasts a wide array of advanced features that cater to various supply chain management functions. These functionalities empower businesses to manage their data with precision and efficiency.
Data Analysis Tools
Excel’s built-in functions, such as pivot tables, pie charts and advanced charting capabilities, allow users to analyze huge datasets, drawing actionable insights from complex information. This is particularly valuable in supply chain management, where making informed decisions can significantly enhance operational efficiency.Formulas and Functions
With the wide range of complex formulas available, users can automate complex calculations related to inventory levels, lead times, and demand forecasting. This automation helps to minimise human errors and ensures a more accurate representation of data. There is a level of expertise necessary to set the formulas up correctly. When working with extensive datasets or having the need to carry out complex data management tasks, it's recommended that some training is taken beforehand.
Conditional Formatting
Excel enables users to highlight critical data points through conditional formatting. For example, inventory levels falling below a predetermined threshold can be flagged automatically, allowing managers to take timely action. whilst this is a basic function of Excel, it's a powerful one when working with enormous amounts of data. This allows you to understand at a glance the story the data is telling you without having to look through cells one by one.
Collaboration Capabilities
Excel supports multiple users working on a single document simultaneously with a cloud-based solution, which is essential for teams involved in supply chain functions. This makes it an attractive entry level project management tool without having spend hundreds of pounds a year. This feature ensures that all stakeholders have access to the most current information, as well as covering previous versions, which fosters transparency and facilitates teamwork.
To find out more, you can take a look at the top 10 MS Excel uses.
The Cons of Excel in Supply Chain Management
The majority of issues fall into two main categories:
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. This is where more advanced data visualisation tools become essential.
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. 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.
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.
“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 and possible performance issues, 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.
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.”
If you're looking for more modern ways to improve your supply chain management, take a look at our article discussing how AI has been transformational in the supply chain.
Conclusion
In conclusion, while Excel may be a convenient and affordable solution for basic data management and analysis, it has its limitations. There is a balance between providing an acceptable user experience and enabling an ideal database solution.As an organisation grows and its needs become more complex, the limitations for Excel such as enterprise level robust data analysis capabilities 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.
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.
About FLOX
FLOX supports businesses in navigating the complexities of today's dynamic environment by providing the tools and insights necessary for success.
By promoting collaboration and making better use of available capacity, FLOX enables greater flexibility and agility in supply chain operations planning. Its platform streamlines processes, enhances decision-making, and fosters a culture of transparency and accountability, ultimately transforming how organisations manage their supply chains.