It is true for many businesses that the inventory management starts from spreadsheets. The simplicity, familiarity and flexibility of spreadsheets can make it suitable for many small businesses with their early stage. A spreadsheet is adequate enough for a business to keep track of products, quantity and movement of stocks at the beginning. As a matter of fact, spreadsheets work well enough in initial days.
However, as the business grows up. More products added. More shops opened. More people are included. More stock move from warehouse to store, van, workshop and site etc. These could be a time to get the limitation of the spreadsheet. In fact, spreadsheets usually fail not by overnight, but it can gradually fail. Everything is normal on surface level. Stock numbers are correct. Reports can still be generated. Business seems running normal. However, it contains more and more small errors under surface level. Ultimately, small errors became impossible to be neglected as business problems.
Why spreadsheets work in the first place:
Spreadsheets is one solution of inventory management due to the following advantages.
For a business at a single location with a limited products:
low cost
flexible
customized
quick to implement
no special training needed
For less frequent product moving, it would not take too much time to enter data. Warehouse employees can fill in and managers can review it. A company can continue business without huge problem at this time. They might be correct in using spreadsheets at this stage. But it become to be a problem when the operation is complicated.
First sign: several people inputting data.
If more than one people are imputing data, then problems emerge such as: which one is the latest? Who is the one last updated and did he actually save it correctly? Has anyone overwritten previous data? In this point, managing the spreadsheet becomes a primary focus of inventory management. Uncertainty grows and it costs a business significantly.
Second sign: more than one location.
The biggest breaking point of a business comes at the point when the business have more than one inventory location. It can be multiple warehouses, many stores, different delivery vans or service vehicles, or temporary storerooms etc. As it may be physical existed, it's unsure whether anybody is fully know it and where it is? Inquiries are popping out one by one through the day like: "Is there inventory at warehouse A or store B, did it receive it? Was that entry recorded? Which store actually has the item?" At this stage, the spreadsheet may show there are some information, but they are lack of confidence.
Hidden problem: delayed visibility.
The majority of inventory issues is not due to "missing items," but due to "slow to discover item." Consider two storerooms: One shipment from warehouse to store is completed if there is a system update on the spreadsheet that represents it has already left warehouse, or has already arrived in store. If the spreadsheet is updated after some time of delayed delivery, then it may lead to discrepancies in the business. A hundred similar delayed inputs per month means that business's current inventory number has drifted far from the reality. It's a fact that if the delay is greater, so does the distance between actual and logical information. Many of inventory issues are related to visibility issue. Businesses do not have "no data"; rather, they have "no actual-time data". The actual figures for inventory visibility and business operation were illustrated in https://theinventorymaster.com.
Another sign: manual workaround emerge.
Employees develop other manual systems like own personal spreadsheet, handwritten note, independent tracking or inventory checklist, informal report and so on due to they could no longer trust the main system. When trust starts to disappear, efficiency is lost significantly. Inventory information is no longer used for decision making, and staff spends most of the time trying to confirm the information. This is basically a business workaround rather than workaround a spreadsheet.
Cost of uncertainty.
Businesses seem to only notice the losses of theft, damage or overstock/stock-out etc. But a costs of uncertainty itself is still significant. Once the company has no confidence in inventory information, they would be delay to make decisions, managers will ask staff to check again, and will place orders cautiously to avoid understock. Stock would be held up in inventory just-in-case, all these indirect costs can overcome the direct losses due to missing inventory. The business processes slows down not due to the low performance, but due to the verification work.
Replace with what?
Modern inventory management system could overcome those challenges effectively not for feature enrichment, but for gaining visibility.
Centralized data: The single source of truth available to all.
Real-time updates: inventory changes reflected immediately.
Location visibility: employees know exactly where inventory is.
User accountability: every change can be traced back to an action.
Automated workflow: reduction of manually intensive operations.
It's a clarity and efficiency that matters.
Technology is not the magic pill.
One common assumption that organizations make is that buying a new software will automatically resolve inventory management issues. But, it would just automate a poor process; a bad process is still a bad process. When adopting new systems, focus should be put on standardized processes, proper receiving procedures, tracking movements precisely, and encouraging adoption by staff. Technology enhances effective processes.
The actual lesson:
Spreadsheets fail when the speed of business exceeds the speed of updates. This is the fundamental reason of business process limitations. Not about the number of products, number of stores but rather, how quickly information can flow. Once there is a gap, there is no visibility, and there is no way for inventory management to run beyond simply guesswork.
Final comment.
Spreadsheets is one of the best tools we could have. Many businesses are thanks to its convenience for their growth. However, inventory management is ultimately a situation that requires a higher level of visibility, speed and collaboration. At this stage, spreadsheets no longer fit for a business, instead it becomes a constraint. Successful businesses are those who recognize this and use tools that keep information moving as fast as operations. If you want to find out more information about inventory visibility and business processes, please refer to https://theinventorymaster.com.
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