Why Do Spreadsheets Ruin Inventory Management?

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Spreadsheets are incredibly common in the business world, and for good reason – they make it possible for practically anyone to carry out ad hoc, bespoke analysis. Unfortunately, spreadsheets are often used as a permanent solution rather than a quick fix, and often far beyond their capability. Let’s look at several ways in which your faithful old spreadsheets might be holding your inventory management back.

Spreadsheets are static

Tailored inventory management software will typically support perpetual inventory. In a perpetual inventory system, inventory data is updated in real-time as inventory is bought, sold, produced and transported. Unlike spreadsheets, inventory management software can quickly deliver an always-accurate running total of stock. A spreadsheet based inventory system simply can’t compete.

Spreadsheets lack context

A useful feature of inventory management software is the extensive collection of metadata that is developed over time. Some of this metadata, such as timestamps, can be used to check the recency of a data set. The metadata associated with inventory data can also be used for audit and fraud prevention purposes, and to promote staff accountability. Because user records are retrievable, dishonest staff are less likely to carry out and cover up theft or damage. Spreadsheets lack these contextual tools.

Spreadsheets lead to poor data entry

Excel has limited tools for importing data, so data is often manually entered. SKUs or quantities can easily be entered incorrectly; among hundreds of entries, the wrong value might not necessarily stand out. Data can also be entered into the wrong cell, distorting calculations that rely on that cell.

Errors in formulas are difficult to spot

Another key source of errors in Excel sheets are the formulas that drive calculations in a spreadsheet. Formulas perform calculations or other actions on the data in a worksheet. They can be simple; a SUM formula could be used to add the number of units in several warehouses to get a total for the business. More often, formulas are complex, using a mix of functions, references, operators and constants to produce the desired result. Excel is highly accurate in the sense that it will faithfully execute whatever calculation is entered into the formula bar. The difficulty comes from the complexity of formulas, which can make it very difficult to realise when a formula or series of formulas is not written to produce the desired result.

Excel only allows one user at a time

Although some spreadsheet offerings support multiple users, Excel (the spreadsheet application of choice in the business world) does not. Only one user can input data at a time. This can lead to users forgetting to update data later on if the spreadsheet is in use at the time of the actual change.

Spreadsheets are generalists, not specialists

One of the most touted benefits of a spreadsheet is that it is flexible, and can be used to perform many kinds of analysis. The other way of thinking about this is that Excel and other common spreadsheet applications lack specialised tools and functions for inventory management. On the other hand, specialised inventory management software is usually feature-packed.

Spreadsheets are expensive in the long run

Although Excel seems inexpensive, and some spreadsheet offerings are free for small businesses, lost productivity and increased errors quickly add up. On the other hand, software as a service inventory offerings have made affordable inventory management an option for businesses of all sizes.

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Melanie - Unleashed Software

Article by Melanie Chan in collaboration with our team of Unleashed Software inventory and business specialists. Melanie has been writing about inventory management for the past three years. When not writing about inventory management, you can find her eating her way through Auckland.

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