Simplify Your Inventory Tracking: Guide on Excel Inventory Management
- This guide provides information on using Microsoft Excel for inventory management.
- It explains the benefits of using Excel for inventory tracking and how to set up an inventory tracking system using Excel.
- It emphasizes the importance of data-driven insights in improving customer experience, streamlining product information management processes, and generating higher revenue.
In this Article
Many businesses and individuals find inventory management a challenging task, especially when they have limited resources. The process includes keeping track of stock levels, monitoring sales, and ensuring timely order fulfillment. To simplify this process and save valuable time and resources, an effective system for inventory tracking, such as Microsoft Excel, is required. Excel inventory management provides businesses and individuals with a user-friendly and cost-effective solution to streamline the inventory tracking process.
Excel is a powerful tool that can be used to manage inventory efficiently and streamline the process. But Excel is not the only tool available for this task. In fact, there are more advanced solutions, such as Product Information management software, that introduce more productivity, efficiency, and effectiveness. Nevertheless, Excel is an excellent option for those who are just starting or have limited resources. In this comprehensive guide, you will learn how to use Excel to manage inventory effectively, and, most importantly, we will help you know when to upgrade to advanced inventory management systems like PIM solutions.
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What is Excel Inventory Management?
A typical business owns several assets that facilitate its smooth operation. For example, an online apparel company may own a warehouse where merchandise is stored and ready for shipping to clients. The complete catalog of items under the company’s ownership is what we call inventory.
Many businesses own an extensive list of items, so tracking them could be challenging. But they must find a way to manage the inventory effectively because it is a crucial element of supply chain management. One useful tool for inventory management is an inventory tracking spreadsheet, typically created using software like Microsoft Excel. This simple inventory system allows businesses to input and organize information about their inventory, including product details, quantities, and supplier information.
By regularly updating this spreadsheet with real-time data, businesses can easily monitor stock levels, identify items that need replenishment, and make informed purchasing decisions. This streamlined approach to managing inventories not only enhances operational efficiency but also minimizes the risk of stockouts or excess stock, ultimately leading to improved customer satisfaction and cost savings.
From Paper Spreadsheets to Microsoft Excel
Humans have used different spreadsheets since the beginning of history to manage inventory. Spreadsheets streamline inventory management by organizing and storing data in tabular form. Additionally, they enable users to perform calculations, analyze inventory data by applying functions, and translate insights into graphs for straightforward interpretation. As such, spreadsheets are helpful regarding planning, optimization, and forecasting.
Before Microsoft Excel spreadsheets, individuals and businesses used paper spreadsheets. These are the earliest forms of spreadsheets that used rows and columns to record data, such as inventory, expenses, or financial transactions. Accountants and bookkeepers used these ledgers for hundreds of years to keep track of various aspects of business operations. However, paper spreadsheets had some limitations, such as being prone to errors, difficult to update, and hard to share.
Electronic spreadsheets were the answer to the many challenges of paper spreadsheets. Remy Landau and Rene Pardo developed the first electronic spreadsheet in 1969 for mainframe computers called Language for Programming Arrays at Random (LANPAR). LANPAR allowed users to enter formulas and references to other cells. By the time Microsoft Excel came into the picture in 1985, several electronic spreadsheets were in use, including Bob Frankston and Dan Bricklin’s VisiCalc, Quattro Pro, and Lotus 1-2-3. While each program boasts unique features, Excel became more popular because it was more powerful, versatile, and offered more advanced features.
Together with Word, PowerPoint, and others, Excel has made Microsoft Office the most popular office suite against competitors like Google Workspace, LibreOffice, and others. Excel runs on different operating systems, such as Windows, Mac OS, Linux, Android, iOS, and web browsers. It can also integrate with other applications and services, such as databases, cloud storage, email, calendars, etc.
Excel can handle large amounts of data and complex calculations. It also supports collaborative work by allowing multiple users to access and edit the same spreadsheet online. In addition, since Microsoft partnered with OpenAI, the creator of the popular Chatbot called ChatGPT, Excel incorporates artificial intelligence and machine learning to provide insights and suggestions based on the data.
Before we explore the reasons for Excel’s popularity and the benefits you get when using the spreadsheet solution for inventory management, let’s discuss the importance of managing inventory first.
As previously discussed, inventory management is essential for smooth business functioning. Furthermore, effective inventory management is crucial for companies of all sizes due to the following factors:
- Cost management: Appropriate inventory management prevents businesses from overstocking or understocking, thereby reducing expenses linked to storage, insurance, and potential losses from obsolescence or expiration.
- Client satisfaction: Inventory management ensures businesses maintain ideal stock levels. By doing so, they guarantee the availability of the right products when customers require them, resulting in enhanced customer satisfaction and loyalty.
- Improved efficiency: Inventory management simplifies business processes. By eliminating unnecessary delays in operations, businesses conserve time and resources, leading to heightened efficiency and productivity.
- Competitive edge: An efficiently organized inventory management system allows businesses to swiftly adapt to market fluctuations and customer needs, providing them with a significant advantage in the market.
How Excel Can Be a Cost-Effective Solution for Inventory Tracking
Excel is the modern-day spreadsheet with which most inventory managers are familiar. The factors that make the software ideal for all company sizes aside, Excel offers a wide range of benefits, including:
Low Cost and Accessibility
Excel is a part of the Microsoft Office suite, which is available at a relatively affordable price. Moreover, many businesses already have access to the Office suite, making Excel an even more cost-effective solution.
Regarding accessibility, Excel has an edge primarily because of the ubiquity of Microsoft’s Office suite. Since the Office suite is widely used, most inventory managers know its basic functions and features. This familiarity means businesses can easily implement Excel inventory management without investing in extensive training or onboarding.
Additionally, Excel is compatible with various platforms, including Windows, macOS, and even mobile devices. As such, users can access and manage inventory data from almost anywhere. Cloud-based services like Microsoft OneDrive or SharePoint can also store inventory data, making it easy for multiple users to view and edit the information in real time.
Customization and Flexibility
Excel offers a high degree of customization and flexibility regarding inventory management. This feature makes the software versatile. The platform achieves versatility in the following ways:
- Customizable templates: A variety of pre-built templates is provided in Excel inventory management, which can be easily customized to suit the specific needs of your business. You can modify these templates by adding or removing columns, rows, and data fields as needed.
- Formulas and functions: The platform’s powerful formulas and functions can be used to perform complex calculations, automate tasks, and generate insights, making it easier to manage inventory effectively. You can create custom formulas to calculate stock levels, reorder points, lead times, and more.
- Conditional formatting: With Excel’s conditional formatting feature, you can apply specific formatting rules to cells based on their content, making it easier to visualize inventory data and identify trends or potential issues. For example, you can highlight stock levels below a certain threshold or items that need to be reordered.
- Data validation: The software allows you to add data validation rules to cells, ensuring that the information entered is accurate and consistent. This can help prevent errors in inventory data and improve overall efficiency.
- Pivot Tables and charts: Excel’s Pivot Tables and graphs enable you to quickly analyze and summarize large amounts of inventory data, making it easier to identify patterns and make informed decisions. You can create custom reports and visualizations to understand your inventory situation better.
- Integration with other tools: Excel makes it easy for users to extend its capabilities by easily integrating with various other software tools and platforms. For example, you can combine the platform with barcode scanners to expedite data entry processes. This allows you to streamline your Excel inventory management processes and improve overall efficiency.
Ease of Data Analysis and Reporting
Microsoft has done a great job equipping Excel with robust data analysis and reporting tools. The tools simplify the process of monitoring and evaluating inventory levels. Some of the essential tools include:
- Sorting and filtering: The platform enables users to sort and filter data quickly, making it easier to find and focus on specific items or trends. This feature helps manage inventory levels, identify slow-moving items, and prioritize restocking.
- Reporting templates: Excel provides the ability to create custom reporting templates, enabling businesses to generate consistent and professional-looking reports for internal use or external stakeholders.
Process Automation
Excel offers numerous automation features, such as macros and Visual Basic for Applications (VBA) programming. The features allow inventory managers to streamline workflows and reduce errors. Users can automate tasks such as data entry, calculations, and report generation, reducing the risk of human error and freeing up time for more strategic tasks.
Easy to Learn and Use
The average user expects spreadsheet software to be unsophisticated because, after all, there is no reason to complicate a record of rows and columns! Microsoft gets it if the design and functionality of Excel are anything to go by. Microsoft Excel is a user-friendly software that is relatively easy to learn and use, even for individuals with limited technical skills. The following features back up this claim:
- Comprehensive resources: Numerous resources are available online and offline to help users learn Excel, ranging from beginner to advanced levels. These resources include tutorials, videos, guides, and even full-fledged courses that allow employees to acquire the necessary skills quickly.
- Intuitive interface: Excel’s interface is designed for simplicity and easy navigation. Users can easily find and use the features they need, making it an ideal tool for those who are not tech-savvy or have limited experience with other inventory management software.
- Customization: The platform allows users to change the appearance of their spreadsheets to suit specific preferences. This makes using the software more enjoyable and improves the overall user experience.
- Wide adoption: Due to its popularity, many employees likely already have some experience with Excel. As such, companies do not have to worry about the learning curve and onboarding resources when adopting the software.
- Compatibility: Excel is compatible with various operating systems, making it accessible to many users. Excel files can be easily exported and imported into other software applications, facilitating seamless integration with existing systems.
Creating an Excel Inventory Management System
You can create a simple inventory system or a basic product catalog with Excel. The same software can create a complex system for tracking product lists and stock levels. Amazingly, you can do all this without the need for specialized software. This section will show first-hand how you can create a simple inventory management system.
Setting up the Worksheet Structure
You must install the Excel software on your computer to complete this process. To this end, you must acquire a user license for Microsoft Office, which bundles all office applications, including Excel.
The first step to building your inventory management system in Excel starts with establishing the worksheet structure. This involves organizing columns and rows to accommodate relevant information about your products. Consider including columns for several items with headers like “Product ID,” “Product Name,” “Category,” “Unit Price,” “Quantity in Stock,” “Reorder Level,” “Reorder Quantity,” “Total Value,” and “Status.” This structure allows you to input and track information for each product in an organized manner.
For example, the structure of the worksheet could look like the image below:
Inputting Product Information
With the worksheet complete with properly labelled headers, you can enter the product information. First, specify each product’s information in the required columns. For example, enter the data in the cells for the product’s unique identifier (Product ID), name, category, unit price, and initial quantity in stock.
Additionally, input the reorder level and reorder quantity for each item. The reorder level is the stock level at which you need to place a new order to replenish stock, while the reorder quantity is the number of units to be ordered.
For example:
Using Formulas for Calculations (e.g., Stock Levels, Reorder Points)
As discussed previously, Excel’s powerful formula capabilities enable you to perform calculations on your inventory data automatically. In our example, the formulas can help you to calculate stock levels, reorder points, total inventory value, and other essential metrics.
For instance, say you want to use an Excel formula to determine the value to put in each product’s “Total Value” column (column H). To this end, use the formula “=D2*E2” to multiply the unit price by the quantity in stock.
Excel has a trick that enables you to automate the process for all the remaining products so you do not spend precious minutes repeating the same manual process. To do this, drag the green box in the first cell down; this action will copy this formula down for all the products in the inventory.
For the “Status” column (column I), use an IF formula to display “Reorder” if the stock level is below the reorder point and “In Stock” otherwise. The formula should look like this: “=IF(E2<=F2, “Reorder”, “In Stock”)”. Copy this formula down for all the products in the inventory.
Implementing Data Validation to Prevent Errors
Data validation rules are crucial to ensure data accuracy and consistency. For example, you can set up validation to ensure that only positive numbers are entered in the “Quantity in Stock,” “Reorder Level,” and “Reorder Quantity” columns.
To this end, click on a cell in the “Quantity in Stock” column, then go to the “Data” tab and click “Data Validation.” In the “Settings” tab, choose “Decimal” under “Allow,” and select “greater than or equal to” under “Data.” Enter “0” in the “Minimum” box.
Repeat this process for the “Reorder Level” and “Reorder Quantity” columns.
With these few steps, you have a simple inventory management system running in Excel.
When to Upgrade to a Dedicated Inventory Management System
Granted, excel will ensure that your inventory is up-to-date and detailed. But despite the utility, the software comes short compared to more robust competitors. These competitors are incredibly superior in areas where Excel faces challenges. Before we see which alternatives are available, let’s explore a few limitations that Excel experiences in inventory management:
- Scalability: As businesses grow, so does the complexity of their inventory management needs. In the example above, we used Excel to create a simple inventory management system that may serve a small business perfectly well. However, the software may struggle to handle large amounts of data and multiple users, affecting the system’s performance and increasing the risk of errors.
- Collaboration: Excel lacks robust collaboration features, making it difficult for multiple users to work simultaneously on the same file. This can lead to version control issues and potential data loss.
- Real-time updates: Excel cannot provide real-time updates on inventory levels. You may need to perform additional actions before the insights become available. This could result in delayed decision-making and stockouts or overstocking.
- Integration: Excel does not easily integrate with other business software, such as e-commerce platforms, point-of-sale systems, or accounting software, leading to manual data entry and increased risk of errors.
Why Product Information Management (PIM) Tools are the Best Alternatives
A product information management (PIM) system lets users store, manage, and enrich product information. The enrichment process entails adding more grainy details to product data to make product catalogs more informative to end users. Unfortunately, this is one department in which Excel underperforms significantly. PIM tools supersede Excel inventory management in specific areas, including:
- Enhanced scalability: PIM software are designed to handle large volumes of product data, providing businesses with a scalable solution that can grow with their needs.
- Improved data accuracy: An eCommerce PIM system creates an incontrovertible data repository, and only authorized personnel can access it. Most PIM solutions, including Catsy PIM, provide features like brand portals, which are self-service tools that enable you to deploy data to a select group of users without giving them unnecessary access to other sensitive information. Such tools automate many data entry and retrieval processes, reducing the risk of human errors and ensuring that inventory records are accurate.
- Real-time updates: PIM tools allow real-time data synchronization across multiple users and devices. For example, Catsy PIM solution has pre-built integrations with several ERP solutions, meaning the central data repository is automatically updated once activity occurs in specific ERP platforms. This ensures that all team members have access to up-to-date inventory information.
- Advanced reporting and analysis features: PIM SaaS tools offer specialized reporting and analysis capabilities tailored to inventory management. For example, Catsy PIM provides customizable dashboards and reports, which allow users to track key performance indicators (KPIs) and gain insights into their product data. In addition, users can easily create and share visual representations of their data, such as graphs, charts, and tables, to provide a comprehensive overview of their product portfolio’s performance. Furthermore, Catsy PIM’s analysis features allow users to identify trends, patterns, and anomalies in their product data, enabling them to optimize their product offerings and inventory management strategies. These data-driven insights can help businesses make informed decisions to improve their customer experience, streamline their product information management processes, and, ultimately, generate higher revenue.
Conclusion
Excel is a must-have tool for small businesses to manage product information, especially product listings and inventory levels. But while the software is a powerful tool for inventory tracking, there are more advanced solutions available such as product information management (PIM) systems that introduce more productivity, efficiency, and effectiveness. However, Excel inventory management remains an excellent option for simple projects that do not require comprehensive product data management, or when a business has limited resources.
Whether you choose to use Excel or explore more advanced solutions like a product information management system, it’s important to prioritize effective inventory management. Maintaining accurate and up-to-date inventory records is crucial for optimizing stock levels, reducing costs, and meeting customer demands.
If you’re interested in exploring a comprehensive solution for managing your product information and inventories, you can explore Catsy, a leading provider of PIM and DAM systems. Catsy can demonstrate how their software can streamline your inventory management processes and help your business thrive in today’s competitive market.
Inventory management is the process of tracking and managing a company’s inventory levels, including monitoring sales, keeping track of stock levels, and ensuring timely order fulfillment.
Excel can be used to manage inventory by creating a worksheet with properly labeled headers and entering product information such as unique identifier (Product ID), name, category, unit price, and initial quantity in stock.
Using Excel for inventory tracking can help businesses save valuable time and resources by providing an effective system for managing inventory levels, monitoring sales, and ensuring timely order fulfillment.
While Excel is a powerful tool for inventory tracking, it may not be suitable for larger businesses with complex supply chains or those that require real-time data updates. In these cases, more advanced solutions such as product information management (PIM) systems may be necessary.
Businesses should consider upgrading to an advanced inventory management system like a PIM solution when they have outgrown their current system or require more advanced features such as real-time data updates or integration with other business systems.
