4 Reasons Why Spreadsheets Suck for Inventory Management
Spreadsheets are everywhere. They are probably the most frequently used tool in the majority of companies and business processes. Most small manufacturing businesses start off with using spreadsheets for sales order tracking, manufacturing planning, and inventory management. And it's ok. But only at a micro scale.
As your business grows, you will quickly run into all sorts of trouble if you continue managing your inventory in spreadsheets. Spreadsheets are not scalable. You will soon lose sight of your inventory levels on-hand, amounts expected from suppliers, slow-moving inventory, and so on. And this will cost you a lot of money: missed delivery deadlines mean unhappy customers, cash is tied up in excess inventory, and material purchasing is out of sync with manufacturing. It's time to move to the next level.
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Here are the main reasons why spreadsheets are not good enough for inventory management.
1. No automatic updates
Inventory spreadsheets do not update automatically when you purchase materials, manufacture your products or sell them to your customers. Spreadsheets require continuous manual updating, which is time-consuming and stressful. This means that your inventory spreadsheets are generally out of date. Specialized manufacturing and inventory management software automatically syncs your stock with purchasing, manufacturing, and sales.
2. Data entry errors
Inventory spreadsheets require manual data entry. Mistakes are easy to make. Especially if your business is growing, the number of transactions is soaring and you need to spend more and more hours updating your spreadsheets to stay on top of things. Inaccurate quantities could be entered, wrong cells could be edited, and formulas could be overwritten with hard entries.
3. No changes history
When making changes in spreadsheets, users usually just overwrite values. Or at best, create new sheets for each month. Nevertheless, inventory spreadsheets do not keep sufficient history of movements, and it's hard to track the transactions that triggered changes in inventory levels. Thus, analyzing historical inventory data and, also, identifying causes for mistakes becomes extremely difficult.
4. Spreadsheets are expensive
Spreadsheet tools are often free and, therefore, seem to be the cheapest option. However, you should account for the total cost from the perspective of achieving your goal - effective inventory management and, ultimately, running a growing and profitable business. Time-consuming manual inventory updates, out of date inventory data and faulty data could all prove to be extremely costly. Not to mention low productivity, overdue deliveries, unhappy customers, and lost business.