Many businesses begin their supplier management program using Microsoft Excel, that old stalwart of the business world, to track suppliers and spend. In the beginning, using Excel is generally adequate, but as your supplier base grows and you begin to develop goals and strategies related to your suppliers, you need more than what Excel can offer.
Let's look at the pros and cons of Excel, as well as how to determine when it's time to upgrade to something more robust than spreadsheets.
Excel has a lot going for it. From ease of use to its sheer ubiquity, it's no surprise that Excel is pressed into service for supplier management. Here are just a few of Excel’s many advantages:
- Easy to learn and use – Thanks to the Internet, you can find free tutorials for just about any task you need to execute in Excel. If you need to go deeper than a free tutorial can take you, an abundance of classes, workshops, and training sessions are offered at local colleges, business development seminars, and on a one-on-one basis.
- Highly customizable – Part of the appeal of Excel is its flexibility. You can customize spreadsheets for any number of uses: profit/loss reporting, debt management, tracking spend, inventory management, and, yes, supplier management.
- Cheap – Excel is part of the package with Microsoft Office, software that your business most likely already pays for, so you don't need to pay an additional fee for it. Microsoft is moving to a subscription-based option for Office as opposed to purchasing the software outright, but it's still fairly inexpensive.
- Ubiquitous – Almost everyone in the business world has heard of Excel and has at least some experience using it. Universal recognition makes us feel comfortable using and trusting Excel to get the job done.
- Portable, easy to share – Because Excel is so ubiquitous, it's easy to share spreadsheets with team members or stakeholders. Even if the other user doesn't have Excel him- or herself, other programs like OpenOffice and Google Docs can open .xls files and allow users to work with them.
Of course for all its pros, Excel has its share of cons. Once your supply chain grows to a certain point, you will need more functionality than Excel has to offer. These are just a few of the negative aspects that come from working with Microsoft Excel:
- Data are static and must be verified manually – Time-consuming and, let's face it, soul-crushing—manually entering and verifying supplier data is not the best use of your time.
- Data security – Storing your supplier data in a spreadsheet means you're one computer crash away from losing hours of work.
- Pandemic errors – According to a 2008 University of Hawaii study, “errors in spreadsheets are pandemic.” The study found that “[i]n 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.” These errors may be considered acceptable for non-critical processes, but when they result in serious miscalculations in your supply chain or MBE spend, the impact on your organization can be devastating.
- Lack of analytical capabilities – Excel was built to be a calculation tool, not an analytical tool. Once your program reaches the stage where you require ranges, forecasts, what-if scenarios, modeling, planning, or replanning, you will find that they are beyond the software’s functionality.
- Institutionalized knowledge – Critical process knowledge can walk out the door with key personnel—and a spreadsheet cannot replace it.
So how do you know when your supplier management system has outgrown Excel's capabilities? Ask yourself these questions:
- Are you tired of manually entering and verifying data?
- Would your supplier management program benefit from automating mundane tasks?
- Do you need to be able to analyze your supplier data in order to move toward your goals?
- Is Excel simply no longer robust enough to meet the needs of your supplier management program?
If you answered yes to these questions, then you're ready for software designed specifically for supplier management. With the right tools, you'll save time and money, freeing up those valuable resources to focus on meeting your goals.