During the first years of your manufacturing company, a spreadsheet is the answer. It is cheap, adaptable, and accessible. With only ten SKUs and just a few orders to deal with, Microsoft Excel or Google Sheets is the best way to keep tabs on your inventory. But with growing business, that same spreadsheet starts to become a curse.
Although a spreadsheet doesn’t carry any monthly subscription cost, its “costs behind the scenes” are immense. If you are still running your shop using formulas from a spreadsheet, chances are you are incurring hidden costs.
Cost of Human Errors
Spreadsheet systems are highly prone to errors. It depends on users inputting numbers manually and entering the formulas correctly. Any one of these mistakes such as a single click, breaking the hyperlink, or a small mistake when typing any formula will result in an error which is extremely difficult to fix. In any manufacturing plant, an error in BOM does not only reflect an incorrect figure but could be a cause of stoppage of manufacturing processes. Due to your failure to understand that the raw material used is no longer available.
This results in increased costs such as expedited delivery charges. Also paying extra wages to frustrated employees, and ordering urgently from your supplier.
Opportunity Cost of “Data Wrangling”
Think about the time your team spends on data entry. Your data needs to be extracted from your ecommerce site, manually entered the inventory spreadsheet, and subsequently entered your bookkeeping system. The “swivel-chair” activity represents a huge opportunity cost.
Each minute that your knowledgeable production manager spends copy-pasting data is a minute wasted on strategic planning, quality assurance, and process optimization. You are wasting valuable money by paying top dollar for menial labour. By automating these operations with a specialized tool, you’ll give your team an opportunity to work on activities that help your company grow.
Inventory and Cash Flow
Spreadsheets are inherently behind. The moment you finish updating your spreadsheet, chances are that the actual state of things in your warehouse has already changed, resulting in a situation where there is either too much of what you don’t need, or not enough of what you do.
Without accurate data, you can order materials that you already have in storage, using your cash flow unnecessarily. Or you can order more materials, thinking that you have everything you need in your inventory, and face an empty shelf when packing the shipment. This results in losses; therefore, accurate and up-to-date data is crucial to making purchasing decisions.
Version Control Chaos
Last, there is the issue of version control. With spreadsheets, who controls the “master” spreadsheet? Is it the version that is on the production manager’s computer or the copy that is stored on Google Drive? When there are several individuals working on the spreadsheet, the information becomes jumbled and can easily be overwritten.
If an important staff member either leaves the company or goes on vacation, he or she takes all the knowledge of the ins-and-outs of the spreadsheet with him or her, making it difficult for everyone else to manage.
Conclusion
Spreadsheets create a façade of savings. Although they may appear free, spreadsheets cost you money in lost potential, wasted labour, and inventory errors. Moving onto a specialized program for manufacturing or inventory management is not an added expense; it is an investment into the future of your company.
