The Issues of using Microsoft® Excel™ for Planning and Forecasting

At a lot of companies, decision makers question if they can afford to purchase a dedicated system to replace Excel. But where it concerns business-critical functions such as forecasting and planning, the more appropriate question is if the can afford not to. Here we list some of the known issues with using Excel in those contexts.

1. Data Integrity: when spreadsheets are shared among people in an organization, versioning issues occur. Departments may be using old or alternate versions upon which to base their own plans. This compounds when some of the data is manually maintained and sheets become increasingly erroneous over time.
2. False KPI's (Key Performance Indicators): Since 99% of spreadsheets contain formula errors the metrics planners use to base their decisions on are typically wrong. Material is purchased or produced when it is not required or converseley not supplied when a stock out is imminent.
3. Time Drain: Large Excel sheets supporting business decisions require significant time to update and publish each planning cycle. Planners tend to spend a vast majority of their time managing data, and have little time left to do actual planning and analysis.
4. Overly Simplistic Algorithms: Software companies have teams of people that design the most accurate and efficient algorithms for the specific problem they address. No single expert in a planning department can possibly compete, if only for the lack of time to research. Also, Excel cannot handle some algorithms at scale, notably probabilistic ones essential for proper forecasting and planning. Excel formulas will always be inferior to these, no matter the skills of the planner.
5. Information Overload: As businesses or product portfolios grow, so does the amount of information entered into a spreadsheet and indicators presented to users. Reports become increasingly complex, and users are overloaded with details that might not be pertinent to their specific role.
6. Lock Out: When multiple people are using the same spreadsheet at the same time, some will get locked out from making changes. This tends to happen at the worst possible times, when there is an end-of-quarter rush, or when a supply chain emergency requires urgent remediation.
7. Lack of Flexibility: Typically, large planning spreadsheets are created by one expert and used by many people. Over time the expert leaves the company and nobody can maintain the highly complex file. For a while data is updated but errors keep accumulating. When the business requirements change, the spreadsheet cannot accommodate it. At worst it remains in use; at best a completely new one is created at large expense of time.

In terms of cost, the amount of time managing speadsheets accumulates to rapidly start costing a company much more than a best-of-breed dedicated commercial software would have. The risks associated with Excel however are typically much graver. The times when accuracy and expediency are most crucial are exactly the times when Excel fails to perform. 

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