Spreadsheets have, for many, Become the Go-To Solution for Much of their Supply Chain Needs
By Karin L. Bursa, Vice President of Marketing, Logility September 5, 2013 SCdigest.com
How common are spreadsheets in the supply chain? According to an August 2013 survey conducted by APICS and Logility, 47% of the 860 respondents indicated spreadsheets were their primary tool for Demand Planning. Spreadsheets have, for many, become the go-to solution for much of their supply chain needs.
Spreadsheets offer short-term benefits like low cost, ease of use and availability. Everyone you work with has access to view, modify or create spreadsheets. However, these seeming advantages come at a cost. Many in-depth studies have concluded spreadsheets are riddled with errors; it is just part of working in spreadsheets. Typically these are transposed numbers – human error. In general, the errors seem to occur in a few percent of all cells. That means a large spreadsheet is certain to contain several errors.
Ask yourself when was the last time you were confident in the accuracy of every cell in every page of a spreadsheet? The impact of a single error, much less multiple errors, can derail a forecast, cause a supplier to ship too much or too little of a particular product, or lead to customer service nightmares.
In the same survey we found 37% of respondents rely on their enterprise resource planning (ERP) system to manage Demand Planning. ERP systems have very rudimentary planning capabilities. With a few exceptions, they are designed to be the recipient of the forecast not the developer.
Surprisingly, 84% turn to basic tools to manage their Demand Planning needs. Spreadsheets and ERP systems cannot generate an accurate forecast or support best-in-class supply chain processes such as sales and operations planning (S&OP), inventory optimization or vendor managed inventory (VMI). They pose a significant challenge when you have multiple users who will need to share the data or have a large volume of SKUs. Today’s complex supply chains require timely and accurate data to anticipate market changes and respond quickly to unforeseen events.
In order to move your supply chain forward there are four key areas spreadsheets and ERP systems will fail you.
Structure and Flexibility: A flexible structure allows for multiple hierarchies — sales, product, finance, customer, and more. You need the ability to create forecasts at every level of the planning hierarchy and measure forecast accuracy at each level.
Planning Across the Life Cycle: Products have life cycles with various demand profiles that rise and fall depending on the stage. This can be influenced by many factors including promotions and seasonality. Many best-of-breed solutions will automatically change the forecast model as products move from new product introduction all the way through to product phase out; something spreadsheets cannot accomplish.
Measurement: You need to quickly and easily measure forecast error (or accuracy). The ability to track and measure forecast error over time is critical. Factor in the differing needs of each department—sales may require one month of history, finance 12 months and supply three months—as well as the need to measure actuals versus statistical forecast versus collaboration with sales at different time intervals and it quickly becomes apparent spreadsheets will stop you cold in your tracks.
Trust: In order for a system or process to reach its potential, the business must be trust in it. You must trust the data presented before you. Spreadsheets can be a line of chaotic tabs linked to multiple spreadsheets around the organization. You need to have trust in the information, not constantly wonder if the data is correct or the analytics are complete.
Spreadsheets provide a false sense of automation and lack many of the basic capabilities you need to run your supply chain. The advantages of more accurate visibility across your global business for a horizon or 12, 18, 24 months or more and plan accordingly are tremendous. This information is a solid foundation to support more profitable business growth. During the S&OP meeting you want one version of the truth, not a multitude of competing spreadsheets from each department.
Take the guess work out of the supply chain or be left behind.