Excel for Inventory Management: Tips, Best Practices, Pros and Cons

Excel for Inventory Management: Tips, Best Practices, Pros and Cons

Table of Contents

Managing inventory is a critical task for businesses of all sizes, and the choice of tools and software to handle this function can greatly impact efficiency and accuracy. While Microsoft Excel has long been a popular choice for inventory management, it comes with its share of disadvantages that businesses must consider. In this article, we will explore the limitations and challenges associated with using Excel for inventory management, covering why it may not always be the most suitable solution for modern businesses seeking to streamline their operations.

If you do decide to use Excel, the basic fields to track in Excel include inventory ID, name, description, unit price, quantity in stock, inventory value, reorder level, reorder time in days, and quantity on order.

RFID in a warehouse
RFID Readers and Antennas

Can Excel be used for inventory management?

Excel can be effectively used for inventory management, especially for small businesses with basic inventory needs and a limited budget. It allows for tracking inventory levels, monitoring stock movements, calculating total values, creating customized reports, and automating tasks. However, it is not a replacement for a dedicated inventory management system for larger companies with multiple warehouses or complex inventory needs.
Mistakes can be made, and auditing may be necessary to avoid errors. Best practices include categorizing, tagging, and labeling inventory items, performing periodic inventory counts, and utilizing templates and formulas for efficient tracking.

Why use Excel for inventory management?

Excel offers several advantages for inventory management, making it an attractive option for small businesses looking to track their inventory on a budget. Here are some of the unique features and benefits of using Excel for inventory management:

  • Excel is a well-known program that many people are already familiar with, making it easy to use for basic inventory management.
  • Excel offers integrated tools, features, and formulas that can make spreadsheets more dynamic and interactive, allowing you to better organize and track your inventory and stock items.
  • Excel is cost-effective or even free if you use it in OneDrive, making it an affordable option for small businesses.
  • Excel templates for inventory management are widely available, making it easy to get started with minimal effort.
  • Excel can help you categorize, tag and label inventory items for improved awareness across your team, allowing you to better budget for inventory needs.
  • While not ideal for medium or large-sized inventories, Excel can still handle basic inventory management for small businesses.
  • Excel-based inventory management systems can help you avoid mistakes, such as double-counting or misplacing inventory, by providing a comprehensive overview of your inventory needs.
Unified RFID Inventory System

Why not use Excel for inventory management?

In short, here’s a list of some reasons:

Limited scalability for growing inventories.
Manual data entry is time-consuming and error-prone.
Lack of real-time updates and synchronization.
Difficulties in tracking inventory history and changes.
Limited user access control and security features.
Limited support for barcode scanning and automation.
Limited reporting and analytics capabilities.
Challenges in managing multiple locations or warehouses.
Susceptible to file corruption and data loss.
Limited support for collaborative and remote work.

Let me expand on some of them below.

1. Excel does not have the necessary features and capabilities

Excel may not be the best tool for inventory management due to its lack of necessary features and capabilities. While it is a cheap solution for smaller businesses, it may prove unsuitable for expanding businesses. One of the limitations of using Excel for inventory control is the risk of errors due to manual data entry, as well as the limited scalability for large stock inventories.

Excel lacks automated data entry, real-time location tracking, and forecasting abilities, which are crucial features for efficient inventory management. Excel spreadsheets are also time-consuming to create and adapt, and maintaining them can become a significant time sink.

2. Excel is not optimized for inventory management

While Excel may be a cheap and simple solution for inventory management for smaller businesses, it has several limitations that make it unsuitable for expanding businesses. Excel lacks the ability to handle real-time updates, automation, and limited scalability. This makes it difficult to manage a large inventory of products, especially when frequently moving products from location to location.

Specialized inventory management software streamlines the order process for customers, provides real-time asset tracking, and creates automated intelligence reports that provide insights into business performance. Upgrading to a dedicated inventory management system saves time and money in the long run and allows businesses to grow and expand their operations.

3. It does not have the right interfaces

Excel may not be the best choice for inventory management due to its lack of proper interfaces. Without proper interfaces, inventory management becomes prone to errors due to manual data entry, limited scalability for large inventories, and the need for technical skills to create advanced functions and macros.

These issues can lead to complications, time investment, data protection, and limitations in capturing real-time data. It is important to have proper interfaces to ensure accurate and efficient inventory management.

4. It can’t scale with your business growth

While Excel can be a useful tool for inventory management in small businesses, it has limitations that make it unsuitable for scaling with business growth. One of the main drawbacks is the complications that arise as the inventory and business operations become more complex.

Large spreadsheets become unwieldy and difficult to navigate, making it challenging to get an at-a-glance overview of the inventory. Another limitation is the time investment required to create and adapt formulas and functions to match business growth.

5. It does not have the right integrations

Excel may not be the best option for inventory management due to its lack of integration with other software. Unlike inventory management software that can integrate with platforms like Amazon, Shopify, and ShipStation, Excel requires manual data entry which can lead to errors and limited scalability for large stock inventories.

6. It does not have the right data security measures

Excel is not suitable for inventory management due to its lack of proper data security measures. In case of accidental deletion or alteration of data, it is difficult to restore it. Moreover, as the size of the inventory grows, the spreadsheet becomes too big to be useful, making it hard to manage. Excel also requires manual data entry, which increases the risk of human errors.

7. It does not have the right reporting capabilities

Excel lacks the necessary reporting capabilities for effective inventory management. While it may be a cheap solution for smaller businesses, it becomes unsuitable for expanding businesses due to limitations in scalability, real-time data, and automation.

Basic spreadsheets lack the sophistication to track inventory counts across multiple sales channels, check on reorder levels as stocks are depleted, or shift distribution points to better fulfill orders. Also, Excel makes analyzing historical data challenging, making it difficult to generate reports for inventory management.

8. It is not tailored to your business needs

While Excel spreadsheets can be a cost-effective solution for inventory management in smaller businesses, they may not be suitable for businesses with specific inventory management needs. Different industries and businesses have unique requirements for inventory management, and Excel may not be able to accommodate these needs. For example, a business that deals with perishable goods may require a system that tracks expiration dates and ensures that older items are sold first.

A business that deals with hazardous materials may require a system that tracks safety regulations and ensures that these materials are stored and handled properly. Excel may not have the capabilities to handle these specific requirements. Moreover, as a business grows, the complexity of inventory management also increases, and Excel may not be able to scale up to accommodate the growing needs of the business. In such cases, more advanced inventory management software may be required to ensure efficient and effective inventory management.

9. It does not have the right inventory management tools

While Excel is a useful tool for inventory management, it has several limitations that make it unsuitable for expanding businesses. One of the main drawbacks is the risk of errors due to manual data entry, which can lead to inventory discrepancies and lost sales. Additionally, Excel’s scalability is limited for large stock inventories, making it difficult to manage increasing amounts of data.

10. It does not have the right user experience

Excel may not be the best option for inventory management due to its lack of user experience. The software is often built by one person in a company who is knowledgeable about Excel and inventory management basics, making it very dependent on the person’s expertise and challenging for another person to take over. As a business grows, the columns and rows on the spreadsheet increase, making it difficult to navigate and not user-friendly for non-technical users.

Pros and Cons of using Excel for inventory management

Pros of Using Excel for Inventory ManagementCons of Using Excel for Inventory Management
Familiarity: Many users are already familiar with Excel, making it easy to get started.Limited Scalability: Excel becomes inefficient for large or complex inventories.
Low Cost: Excel is relatively inexpensive and widely available.Manual Data Entry: Prone to human errors, leading to inaccuracies.
Customization: Users can create custom templates and formats.Lack of Real-Time Updates: Inventory data isn’t automatically synchronized.
Simple Data Entry: Excel offers straightforward data entry for small inventories.Limited User Access Control: Security and access control are limited.
Data Analysis: Basic analysis and calculations can be performed in Excel.Lack of Automation: Barcode scanning and automation are challenging.
No Internet Required: Excel works offline, reducing reliance on an internet connection.Minimal Reporting: Basic reporting and analytics capabilities.
 
Difficulty Managing Multiple Locations: Complex to manage across warehouses.
 
Risk of Data Corruption: Susceptible to file corruption and data loss.
 
Limited Collaboration: Challenges in collaborative and remote work.

List of 7 best Excel templates for inventory management

1. Product Inventory List Template

The Product Inventory List Template is a free Excel template that helps small businesses and e-commerce stores track their inventory. Its features include tracking of raw materials and products by quantity and unit price, formulas to calculate inventory value and reorder dates, and a glossary of terms. The template is customizable and straightforward, making inventory management easy and efficient. Its benefits include improved organization, cost control, and better decision-making based on sales patterns.

2. Inventory Kit Template

The Excel Skills Inventory Kit Template is a premium template that can be used for managing inventory processes. It includes five inventory pages to track stock usage and movement and is available in Excel, Google Sheets, and Open Office Calc formats. With this template, businesses can easily track products purchased and sold, as well as information such as the amount in stock, unit price, and stock value.

The template also provides the cost of inventory for preparing Profit and Loss Accounts and allows businesses to set re-order quantities and highlights products that need to be re-ordered. It can help businesses analyze their purchases/sales patterns and identify their best-performing products. The Inventory Kit Template is easy to use and can be customized for a business’s specific needs. However, as a premium template, it is not free.

3. Inventory Management Spreadsheet

Creating an inventory management spreadsheet using Excel is a simple and effective way to manage your inventory. First, create columns for inventory items, quantities, and prices. You can also add columns for reorder levels and supplier information. Next, input your inventory data into the spreadsheet. To customize the spreadsheet, add formulas for automatic calculations, such as total inventory value and reorder quantities. You can also set up alerts for low inventory levels by using conditional formatting to highlight cells that fall below a certain threshold.

4. Inventory Tracking Sheet

The Stock Inventory Control template, created by Vertex42, is a multi-worksheet Excel template designed to help businesses manage their stock levels and supplier information. The template includes a count sheet and inventory label template. It allows users to track sales orders and customer purchases, including item numbers, product names, quantities, sale dates, ship deadlines, shipping dates, tracking numbers, clients, retail prices, and total amounts received.

Optional tracking fields can be added to customize the system further. The template is simple and easy to use, making it ideal for small businesses or those not needing advanced inventory management features. However, it may not be suitable for larger businesses with more complex inventory tracking needs. The columns can be customized, and calculations are completed automatically. The template is only available for Excel.

5. Inventory Control Template

The Inventory Control Template in Excel is a simple and easy-to-use template designed for small businesses to manage inventory effectively. The template allows users to view inventory by item name, description or ID number, as well as unit price, total quantity, reorder dates, and discontinued items. Users can customize the columns according to their business needs, and calculations are completed automatically. The template also helps users to track purchases and sales patterns and identify the best-performing products.

To use the template, users need to insert daily inward and outward stock entries and keep an eye on the stock levels to increase profitability. The template is useful for all kinds of businesses, including retailers, wholesalers, store managers, and e-commerce businesses. However, the template may have limitations in managing large inventories or complex supply chains, and additional features may be required for more advanced inventory management.

6. Inventory Information List

The Inventory Information List is a comprehensive tool that provides a detailed overview of a business’s inventory. It includes various data points such as item number, category, product name, description, list price, stock location, quantity in stock, inventory value, reorder level, cost per item, vendor, date of last reorder, days per reorder, stock waiting to be received, and discontinued status.

This list can be utilized in an inventory management system to track inventory levels, assess product performance, determine which items to reorder, store product details, and manage vendor information. For example, a business can use this list to keep track of their current and discontinued items, assess the performance of each product category, and determine when to reorder stock based on the reorder level and the number of items in stock.

7. Warehouse Inventory Template

The Warehouse Inventory Template is an Excel-based inventory management tool that helps businesses keep track of their stock levels. It allows users to monitor products purchased and sold, track stock movement and set re-order quantities. The template also provides information on the amount in stock, unit price, and stock value.

With its clean design and customizable columns, managing inventory is straightforward. Additionally, the template can help businesses analyze purchase/sales patterns, identify top-performing products, and prepare Profit and Loss Accounts.

Alternative to using Excel for inventory management: a third-party inventory management software

Third-party inventory management software has become increasingly popular among businesses due to its ability to automate labor-intensive tasks and improve the accuracy of inventory data. Unlike Excel spreadsheets, inventory software solutions offer a wide range of features that are tailored to specific industries, making it easier to track inventory data accurately. Excel spreadsheets can be meticulous and time-consuming, which can lead to inaccuracies in data entry and a lack of flexibility.

Dedicated software solutions offer a level of customizability that can be adjusted to the needs of the business and can integrate with mobile phones or other devices used by management frequently. With inventory management software, businesses can streamline the order process for customers, reduce the time spent addressing customer concerns, and monitor outgoing stock through multiple channels with ease.

Example of an inventory management system with RFID capabilities: Asset Vue

Asset Vue is a comprehensive inventory management software that offers RFID capabilities to enhance accuracy and efficiency. With real-time inventory tracking and reporting, Asset Vue provides automatic scanning and data collection, reducing manual labor and human error. The software also integrates with other business systems, allowing seamless data exchange and collaboration across departments. Asset Vue can be used in various industries, including healthcare, education, and manufacturing, to streamline inventory management processes and improve visibility.

Using RFID technology in the healthcare industry, Asset Vue helps track medical equipment, reduce losses, and ensure regulatory compliance. In education, it helps manage school assets, track student devices, and optimize resource allocation. In manufacturing, it helps track production materials, monitor equipment usage, and streamline supply chain operations.

FAQs

To use Excel for inventory management, the following data categories and calculations are necessary:

  • Categories: SKU, barcode or QR code numbers, description, location, bin number, units, quantity, reorder quantity, cost, inventory value, and reorder flag.
  • Calculations: quantity in stock, purchase costs, inventory value, and quantity in reorder.

It is also important to simplify the spreadsheet, update it frequently, store it in the Cloud, perform regular audits, integrate it with a barcode scanner, and use a customized template. However, some companies may find Excel to be too cumbersome and may prefer to purchase an inventory software solution. Before entering data, create a list of categories and calculations needed for inventory tracking.

Excel offers a range of capabilities for inventory management, including tracking inventory levels, monitoring stock movements, calculating inventory total values, creating customized reports, and automating inventory management tasks. With integrated tools, features, and formulas, Excel can handle basic inventory management for small businesses on a budget.

However, for larger companies with multiple warehouses, using Excel is no longer an option. While Excel is not a replacement for a truly dedicated inventory solution, it can cover the basics and act as an intermediate solution until a company’s needs grow.

There are several inventory management software that can be integrated with Excel, allowing for a more advanced and efficient inventory tracking system. Asset Vue is one example of inventory management software that can be integrated with Excel. This software enables businesses to manage their entire sales, inventory management, accounting, and operational processes from one dashboard. It also creates automated intelligence reports that give users easy-to-understand insights into their business performance.
Other examples of inventory management software compatible with Excel include Fishbowl, Zoho Inventory, and Odoo. These software solutions offer more advanced features and functionalities that are suitable for medium to large-sized businesses with complex inventories.

When selecting an Excel template for inventory management, consider the following criteria:

  • Choose a template that is easy to use and understand.
  • Opt for a pre-built template if building from scratch seems beyond your skillset.
  • Ensure that the template allows for quick adjustments to keep up with constantly changing stock levels and product choices.
  • Look for a template that offers streamlined analytics capabilities for accurate predictions of future inventory needs.