Microsoft Excel spreadsheet software continues to be the application of choice for supply chain and logistics management at companies large and small, around the world. Its advantages include low cost, ease of use, versatility, universal availability, and good basic functionality.
The most important advantage is that Excel enables experimentation and tinkering, which are very important in the planning field. In planning, unlike other endeavors, the ability to do rapid-fire experimentation on “slightly known” possibilities is very important.
However, Excel poses serious limitations when compared to more robust and full-featured software applications designed specifically for supply chain management and logistics.
In this report, we will explore the pros and cons of Excel usage, and offer suggestions for deciding when to use Excel—and when your organization should graduate to a more sophisticated, transactional application.
Microsoft released Excel in 1985 as an early application for the Apple Macintosh computer. It was one of the first spreadsheets to offer a graphical user interface and pull-down menus along with compatibility with a mouse. A Windows version followed in 1987. In those early years of the personal computer, Microsoft hoped to displace the then-leading spreadsheet software, Lotus 1-2-3. The strategy succeeded, and by 1988 Excel became the most widely-used spreadsheet software.
“Unacceptable” error rates
A 2008 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 organization can be devastating.
For instance, a miscalculation in the quantity of a key part can produce a domino effect in which assembly of the final product is delayed. This could cause a manufacturer to miss production deadlines, resulting in lost orders, 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 organization.”
Signs you’ve outgrown Excel
When an organization is in its early stages, the limitations of Excel may be outweighed by its convenience and affordability. As the organization grows, however, those limitations become magnified. Among the indicators that your organization has outgrown ordinary spreadsheet software are: