Excel in manufacturing: where it stops helping and starts costing

Almost every manufacturing company starts in Excel. That is reasonable: a spreadsheet is free, everyone knows how to use it, and a record of orders, stock and work orders can be put together in an afternoon. The problem is not that you started in Excel. It is that you stay in it longer than it can carry you.

Why Excel works at the start

While one person handles purchasing, production and deliveries, the spreadsheet is an extension of their head. They know which sheet is current, which formula was overwritten by hand and why one row is yellow. There is little data, so a mistake is spotted quickly.

That changes when several people start using the spreadsheet and when decisions that cost money are based on it: how much material to order, which delivery date to promise, what price to sell at.

Where it starts costing

Several versions of the same truth. The file is e-mailed, someone saves it locally, someone adds a column. A month later there is production_plan_v3_new.xlsx and production_plan_v3_new_FIXED.xlsx, and nobody is sure which one applies. The warehouse works from one, sales makes promises from the other.

Retyping. The same figure is entered several times: the customer order in one sheet, the material requirement in another, the goods issue in a third, and finally everything once more in the accounting program. Every retyping is a chance for an error, and every error is found late, usually when the customer calls.

Stock that was true yesterday. A spreadsheet knows what someone typed into it. If material is issued to production at two in the afternoon and entered the next morning, purchasing works with the wrong balance until then. The result is either a stoppage because material is missing, or money tied up in stock that should not have been ordered.

No record of who changed what. When a material price or a quantity in a bill of materials changes, only the new value remains in the sheet. Nobody knows who changed it, when or why. With a complaint or a stock discrepancy, that means the cause can no longer be found.

Product cost is an estimate. To know what a product really costs, you need the material used, the time spent and the scrap per work order. In a spreadsheet this is rarely tracked to the end, so cost is calculated from a bill of materials someone set up two years ago. We write more about this in the article on bills of materials and work orders.

The knowledge is in one head. The spreadsheet is understood by the person who built it. When they go on holiday or leave the company, the macros, hidden rules and meaning of the colours go with them.

Seven signs you have outgrown the spreadsheet

1. You check stock by walking to the warehouse, not by looking at the records.
2. The answer to “when can we deliver” depends on whom you ask.
3. You enter the same figure in three or more places.
4. Month-end closing takes more than a week because data is reconciled by hand.
5. Stocktaking regularly shows differences nobody can explain.
6. You cannot say within ten minutes how much you earned on a given product or customer.
7. One person is irreplaceable because only they know how the spreadsheets work.

If you recognised three or more, the cost of staying in Excel is already higher than the cost of changing. You just do not see it on one invoice. It is spread across stoppages, overtime, wrong orders and decisions made on wrong numbers.

What an ERP actually changes

An ERP is not a bigger spreadsheet. The difference is that a figure is entered once, where it arises, and from that moment everyone who needs it can see it.

• A customer order opens the material requirement and the work order, with no retyping.
• Issuing material to production reduces stock immediately.
• Completing a work order increases finished goods stock and records actual consumption.
• The invoice comes from the delivery, and the posting from the invoice.
• Every change has a user and a time.

The result is not just less typing. The result is that questions about stock, delivery dates or margin can be answered from the system, not from memory.

When Excel still makes sense

Excel does not need to be thrown out. For one-off analyses, simulations and reports you produce once a year, it is still the fastest tool. A good ERP therefore exports data to a spreadsheet in one click. The rule is simple: Excel is for calculating on data, not for storing it.

How to move without a standstill

The most common mistake is trying to change everything at once. A transition that works usually looks like this:

1. List the spreadsheets that are really in use and who maintains them. There are often twice as many as management thinks.
2. Start where it hurts most. That is usually stock, because differences there show up in money fastest.
3. Clean up master data before migrating. An item that exists under three names in the spreadsheets will be three items in the new system.
4. Run both systems in parallel for a month or two, then compare the results before retiring the spreadsheets.

Whether that should be an off-the-shelf package or a custom system is a separate decision, covered in the article Custom ERP or off-the-shelf.

We build our own system, FERP, for exactly these transitions: warehouse, production, logistics, cash register, fiscalisation and HR in one interface, shaped around the company’s processes rather than the other way round. If you recognised yourself in the list, tell us how you work today and we will tell you where it would make sense to start.