Many small and fast-growing companies rely on Excel for managing inventory. A typical company can spend anywhere from 10 to 50 hours per month updating spreadsheets, and the majority (roughly 80%) have errors. Even so, the spreadsheets they've toiled with and "perfected" over the years are hard to stop using. While some legitimate Excel wizards are out there, it's not a long-term solution for a growth-focused company. Before selecting and implementing an ERP system, Excel may get the job done. However, there are inherent risks to using an application beyond its useful life as business requirements change and become more complex.
Risk of errors
Manually entered data is at a much higher risk of error than using an automated system. Whether it's just one employee or multiple, attempting to track inventory using one or more spreadsheets can create problems; inefficiency, keying/rekeying errors, and a lack of real-time updates. For example, suppose the process of inventory management is not reflecting what's on the shelves, what's on backorder, and lead times for incoming products. Unless the spreadsheet is rigorously updated, production, sales, and accounting will never be on the same page. Manually inputting data and updating a spreadsheet after the fact creates inaccurate data output, leading to backorders and selling out-of-stock items. Every time an employee hits 'save' on a spreadsheet, it's already outdated, with sales happening in real-time. This leads to employees and management lacking the actionable data and metrics they need to make inventory-related decisions. An ERP system with robust inventory management can automatically update stock levels whenever you send a PO, sell or ship a product, and receive a shipment inbound.
Lack of efficiency
The many hours spent entering, analyzing, and validating data in Excel and piecing together spreadsheets is not a productive use of time. Ultimately it wastes time fixing problems versus time focusing on more critical tasks. Although an inventory spreadsheet works for you now, there's little guarantee it will still work with an increase in customers, vendors, products, or warehouses. To review and establish re-order points and safety stock levels requires employing an Excel "wizard," which is a precarious position to be in. If (or when) that person leaves the company, their knowledge walks out the door too. Also, consider that as more millennials enter the workforce and employers look to higher younger talent, software automation and technology utilization expectations are much more significant. Suppose your business is excel-based or, worse, paper-based. In that case, it's going to be tough to retain top talent. Having a modern inventory management solution complemented with barcode scanning can track incoming and outgoing products while meeting employees' technology expectations.
Multiple users, locations, or sales channels
Most companies are selling products in different ways; a storefront, online, or by phone. Pulling all of this sales data into one cohesive place is a significant challenge using spreadsheets. Having multiple locations or warehouses increases the likelihood of errors further. There are online versions of Excel, but many still like to work and save spreadsheets locally on their PC. This means taking turns with a spreadsheet and sharing it back and forth. Trying to keep production, sales, and accounting on the same page that work in different places using an Excel workbook that is constantly being passed around and pieced together makes it difficult to promise sales and delivery times to customers. Managing inventory in Excel means remembering to track all transactions that may affect current levels manually. If anything is overlooked or not entered in a timely fashion, the stock won't be accurate. When errors do happen, it typically means increased costs or harmful delays. With an inventory management system, you can integrate with a POS system or eCommerce store and automatically track transfers between warehouse locations.
If you're in the cycle of spreadsheets, there are better and more efficient methods, which begin with understanding the benefits an ERP system can deliver. If you're feeling like your spreadsheet is balancing on a house of cards, and one large order or new customer could make it all tumble down, start considering your options. Empower Business Solutions has successfully helped many small and medium-sized businesses throughout its 30+ year history of implementing ERP software solutions. Contacting our team for a short, informal call can help determine whether your business is ready for a change.