we discovered that one of the leading studies that has been driving the EU Austerity policy is flawed. Why? An Error in an Excel spreadsheet.If it wasn’t so depressing, I’d laugh. Last week,
The Eurozone Crisis really hit its stride in 2010 when several European countries (lead by Greece, Ireland and Portugal) found themselves unable to repay or refinance their government held debt. As a result, this prompted EU countries to implement austerity measures (higher taxes and lower expenses) targeted at cutting government deficits and hopefully reducing debt. The study that drove the austerity decision linked high debt to negative impact on growth. Researchers have finally been able to replicate this study and found issues. One is that the causation may be backwards; that in fact, it could be that slow growth drives higher debt. The other thing they discovered was an error that anyone who has used excel has probably made themselves; a formula that calculates the average for a range of numbers didn’t include the entire range. This error and some tweaks to the assumptions (the years included in the study) actually fundamentally changes the results. This is one of many examples that bring home the risk inherent in Excel models. They can be incredibly complex and errors tend to hide in the underlying formulas hidden to casual inspection. Forbes calls Excel “The most Dangerous Software on The Planet” yet companies still make many decisions every day based on Excel models. Supply Chain is no different. How many times have you pulled data from your ERP system and modeled it in Excel? Companies, even those with costly, complex ERP suites very often turn to Excel for complex decisions. Why?
- They want to simulate something, but don’t want to run it in their ERP system because it takes too long.
- They want to simulate something, but don’t want to risk making changes to their production data until they know for sure that the change is a positive one.
- The data is in their ERP system, but they can’t get the data visualizations they need from their ERP system without an expensive, time consuming customization project.
- Some data is in one system, and other data is in the other system (might even be the same software but a different instance), but both sets of data are needed to make a complete decision.
As a supply chain professional, what would you need to stop using Excel for supply chain decisions? What if you had a tool that allowed you to:
- Create scenarios instantly. Those scenarios are private until you want to share. You can change anything you want and those changes won’t impact production until you want them to.
- Have current data from multiple systems, yet have it all connected as if it were a single environment. One site is Oracle, another is SAP? No problem - the analytics from each system are replicated.
- View numerous standard reports, graphs, dashboards and scorecards. The reporting model is similar to Excel (Rows and columns) so users are comfortable with navigating. Reports leverage deep supply chain and business analytics. Workbook design can be limited to a select few so business logic can be locked down.
- Get analytic results instantly. All data and analytics reside in memory so full ERP calculations occur in seconds, not hours or (gulp) days.
- Share results and have everyone on the team see the exact same version. No worries about people using different versions.
If you had such a tool why would you still use Excel? Have you had any spreadsheet fiascos? If so, comment back and let us know!