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Beware Supply Chain Excel Users (You Are Doomed!)
Beware Supply Chain Excel Users (You Are Doomed!)
April 23 2010
Last week, I attended a
supply chain management
(SCM) user conference in Florida
The main objective of the user conference was to help users learn and share experiences to eliminate business pains faced either due to lack of technology or business processes. MS Excel, was proudly mentioned in many of the conversations I had with supply chain professionals. It felt like SCM professionals were married to Excel, and their supply chain and operational activities cannot function without it.
What is the Relationship Between an SCM Professional and Excel?
I realized that Excel’s relationship with supply chain professionals is due to Excel’s accessibility, flexibility, and usability.
I believe the extensive use of Excel in the supply chain industry is due to the relationship business users have developed with Excel. This relationship can not last long if an organization wants to be competitive and profitable because Excel cannot fulfill the core demands of a supply chain organization. Due to the globalization and dynamic nature of today’s business, it is necessary to have applications that provide visibility, control, collaboration, real-time data sharing among trading partners, and security for optimal supply chain results.
Another reason for a supply chain professional to use Excel is due to data issues within their enterprise application. For example, when SCM users have data issues, the only solution is to extract key information and piece it together in Excel to get optimal results.
Consider yourself doomed if you ever find yourself using Excel for any of these business operations:
Companies with inventory management modules tend to use Excel for planning stock levels as well as calculating inventory (i.e. replenishing a particular item or product within the warehouse). Excel has features that can calculate safety stock by using prebuilt basic formulas such as moving average, standard deviations forecasts etc. Keep in mind that by doing this, an organization will not have the ability to see the entire supply and demand relationship. On the other hand, when the same safety stock is calculated within an application, it will provide visibility to outstanding supplies that need to be replenished; orders can be planned for production; and it can calculate how quickly organizations can turn a forecast into a deliverable product.
Demand Planning / Forecasting:
Planners and forecasters rely on Excel to provide insight on changes in demand at any given time within a specified period. Supply chain professionals don’t realize that demand planning is a collaborative process among internal and external parties but also very dynamic in nature. Excel cannot provide the planner the actual demand for the customer, product, or part. Excel lacks the collaboration, visibility, and “what if” analysis needed to generate a robust demand for the organization. The demand cannot be static; it has dynamic variables such as geo-political, economical, weather etc. when accurate forecast is calculated.
Sales and Operational Planning (S&OP):
Usually, companies don’t have a clear understanding of what their S&OP processes are initially, so most start off with Excel to define and measure if S&OP will work within their business strategy. Unfortunately, most companies forget that S&OP is about analyzing data based on information gathered from various business areas of the organization. It’s important to think before you start your S&OP within an Excel spreadsheet. Excel has limitations when it comes to sharing information, creating “what if” scenarios, and understanding the full impact of the business. Excel will not be able to flag issues to the appropriate individuals when an S&OP is not being met by the manufacturing or delivery teams.
Bill of Material (BOM) Management:
Product planners tend to download a BOMs onto spreadsheets to link up customer demand with the supply of material. You should be aware that if any engineering change occurs it needs to be linked to the BOM. When an organization starts managing BOMs outside of its core application, the notification and change alerts don’t get communicated to the appropriate individuals within the organization. This will create issues like; material shortage, wrong material being used in production, and poor quality. As a result it will not only affect the bottom line but also the reputation if a poor quality product is delivered to customer.
Sourcing and Purchasing Management:
Most buyer and purchasing professionals like to have a list of the best suppliers who not only comply with regulations but also meet lead times and delivery dates on an Excel spreadsheet. The problem with these spreadsheets is that they don’t take into account the price, cost of transportation, and expedite charges and financial viability for the supplier. Excel spreadsheet are missing the link between the supplier performance versus the cost of business objectives, on time delivery, and a company’s strategic objectives. Keep in mind that when an organization is sourcing or purchasing either raw material or office supplies, they always need to be within the spending budget. Excel will not tell the buyer what they had spent before and what outstanding spending budget is remaining. It’s important to stop and think if the payments to the supplier are made on time; if it is time to renegotiate the contractual terms; if the payments to the supplier were made within the appropriate delivery lead-time of the product etc.
No doubt, Excel has certain capabilities that can help you to understand the data coming from enterprise applications. It’s important for supply chain professionals to understand the repercussion of using Excel.
I hope when you think of using Excel to manage your business processes you will consider the issues addressed above. As well, you need to understand that there could be features missing from your enterprise application that will make you turn to Excel.
I am interested in knowing if your organization is using Excel for business functions that can be performed by an enterprise application. Tell me why Excel is being used and what benefits are being derived from it.
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