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Excel or ERP? Which Application, When?

Use-of-Industry-Data_blogImgTo Excel or not to Excel?  That is the question of our times.  Here, now, early in the new roaring 20’s, this 21st century dilemma vexes businesspeople of all stripes.  In the early 90’s Microsoft’s Excel version 5.0 made spreadsheet computing as easy as 1-2-3 and soon captured the market.  Today, while there is a plethora of other spreadsheet options available, Excel still leads the way with over 750 million users worldwide.  

Widespread Excel adoption is why we ask the question at all.  Other spreadsheet software has its own selling points, like Apache’s OpenOffice being open source, or Google Sheets and its native cloud-based architecture, but Excel is still King in its space. This article is just as apt, when applied to the use of other spreadsheet software. It will focus on which processes are appropriately done in Excel and which are best done in your Enterprise Resource Planning (ERP) System?

For this discussion, Excel will represent all spreadsheets as we decide to Excel or not.  

Why Excel at all?

You might be asking yourself why do I need to Excel at all?  Don’t today’s ERP Systems provide all the information I need?  The ERP systems available today have evolved since their early origins in the 1960’s.  Not yet known as ERP systems the term was coined by the Gartner Group in the 1990’s. ERP Systems have been used by manufacturers from their beginning, but what do they do? The acronym provides some clues.  

Enterprise correctly implies the systems are enterprise-wide systems, that can handle all your business processes. While correct to think of ERP systems this way, remember not all ERP systems are equal and some enterprises are bigger and more complex than others.  All ERP systems are not equal when it comes to meeting the needs of all businesses.  Some are too much software for small enterprises while others are not capable of handling the needs of large organizations.

An enterprise’s business resources can be anything from its people to the equipment.  This can be thought of as the company’s assets.  It employs assets as it endeavors to profit on its efforts.  ERP systems provide the means to manage these resources and efforts. Managing these resources and efforts get more difficult as an organization grows.  

This increased complexity requires planning to run the enterprise as efficiently as possible. This is where the P in ERP comes in.  The 1970’s was the advent of MRP in manufacturing.  This acronym stands for Material Requirements Planning.  Almost ERP but not quite.  Remember the term ERP was not yet coined in the 70’s.  MRP focuses on planning a company’s inventory in support of its production and sales forecast/demand.  MRP promises to systematically take a products demand and provide the plan for the acquisition of all the resources needed to manufacture the product by the date promised.  MRP is encompassed in today’s ERP systems.  

ERP systems also cover accounting, customer and supplier relations, marketing, engineering management, quality management, service management, and human resources.  ERP systems now available are very comprehensive in the processes they support, so why use Excel?

Entrenched Excel   

Excel has entrenched itself in organizations worldwide due to its ease of use and ubiquity.  Microsoft was and still is at the forefront of making training materials widely available. Anyone with an internet browser can search for a way to do something in Excel.  Chances are someone has posted a solution to a similar problem on the internet.  Large widely adopted ERP systems benefit from this as well but not to the same degree.

Employees are expected to solve problems and they often turn to Excel for help, even when the best practice might be to use the ERP System for the solution.  Due to the integrated nature of ERP systems, changes needed in one step in a business process often require changes elsewhere.  These changes are often beyond the scope of authority of the employee asked to solve a problem, so he or she will normally seek the path of least resistance and implement an outside the ERP system solution.  Exceling this way creates inefficient processes with life spans that do not endure beyond the tenure of the employee that created it.  

These types of processes are the bane of company leaders and are common in purchasing, finance, sales, and engineering.  These solutions are often undocumented and dependent on tribal knowledge.  This bane is all gain for consultants—whose prescribed solutions go beyond computer systems to change management.  

Change is never easy whether it involves a department, site, or company.  Resistors will abound if change is implemented in a ham-fisted way. Companies need to consider the impact of change on their human assets and seek buy in.

How do you know your organization might be too reliant on processes done outside your business system? 

You might have a problem if…

  1. You do not maintain inventory in your ERP system
  2. Your accounting is maintained in a separate system, e.g., QuickBooks.
  3. MRP is not utilized, and all your planning is done outside the system.
  4. You have a myriad of different software in different areas of responsibility which are not well integrated.
  5. You route purchase approvals using spreadsheet forms and your e-mail system.

Should I ever use Excel?

There are some areas where Excel beats ERP with the general rule being in ad hoc analysis and reporting. Accountants are Excel power users and expecting them to relinquish Excel is unrealistic.  While ERP report writers have evolved, they are not as easy to use as a spreadsheet.  Spreadsheet reports are easily customizable both in layout and formatting.  This allows for all kinds of variations in reporting.  Spreadsheets also allow for the static capture of financial data at points in time for use later in future reporting.  Accountants skilled in the use of Excel can maintain financial spreadsheets which handle all aspects of a company’s financial forecasting, budgeting, and descriptive analytic reporting needs.

ERP systems purport to do a lot of these things, but there are always compromises, and solutions normally involve third party software or additional business intelligence modules. Often custom report writing is needed just to get the standard financial reports in a format acceptable to the company.  Taking this to the next level of forecasting or budgeting requires other modules or third-party software, which might or might not be better than budgeting in Excel.   

Make no mistake, a sales forecast should be loaded into ERP to support MRP forecasts for production and supply chain, but ERP systems do not have special functionality to help you forecast your capital spending in a way that is more efficient than doing it in Excel.

As a rule of thumb, anywhere more judgement is required, the decision or calculation is best done in a tool that provides flexibility.  ERP systems institute control and rigidity while Microsoft Office and the like are unstructured.

Similar reasoning can be applied to Engineering.  Product is not going to be designed in the ERP system but managing the introduction and sunsetting of product into the production process is something an ERP system can do for you.

ERP systems are complex but add rigor to business processes, when properly and fully implemented. This does not always occur. Bad implementations can cause lingering problems and undermine trust in the ERP system.  This can happen when implementations are rushed, and processes are not adequately tested before going live.  This does not mean ERP systems are ineffective.  As consultants, we rarely see ERP systems being fully utilized. More often they are severely under utilized and not trusted for planning production, purchasing, or tracking inventory.  This is what ERP systems are designed to do.

When implemented properly, ERP systems are a great repository of data, and with business intelligence systems, report writing, and the ability to query the database, data can be configured into dashboards or reports that can be used to manage your organization but do not expect these all to be available out of the box.  All ERP systems come with canned reports but expect customization to meet your specific needs.  Even with all reports up and running, anticipate the need for ad hoc analysis that requires querying the database directly or through a business intelligence system.  

Big data is now a thing and data scientists are a hot job.  Your business might not be big enough to have big data that can yield revelations through sophisticated statistical analysis of your data, but that does not mean you will not benefit from simpler data mining that might or might not reside in the ERP.  Midsize to small organizations can benefit from lighter business intelligence solutions like Microsoft’s Power BI while this software would be inadequate for tackling true big data analysis at larger companies.

Whatever your circumstances, consider your ability to access and secure your data, no matter which ERP system you use and whether the data is on-premises or in the cloud.  ERP systems do a lot, but they do not do everything.  Consider use of outside systems, even Excel, when Ad hoc, or more complex analysis is required.  It does not have to be Excel to excel, be flexible and use situational awareness when designing your business processes and consider outside expertise when necessary.  As the axiom says, measure twice, cut once. Contact a Meaden & Moore expert to learn more. 


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Scott Holter is the Director of Meaden & Moore’s Business Solutions Group. He has spent 20 plus years in manufacturing and technology consulting.

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