Excel vs MRP System – Which is Best For You?

Introduction to Manufacturing Software Solutions 

Manufacturing software solutions are designed to streamline and optimise various aspects of modern manufacturing operations. These solutions leverage technology to enhance efficiency, accuracy, and overall productivity, helping to improve processes, reduce costs, and maintain a competitive edge. 

What are the Pros and Cons of using Excel for your Manufacturing Operations? 

Excel is a versatile and affordable software solution that many smaller manufacturers initially use to manage material stocks and production plans. Let’s take a look at the main benefits and drawbacks of using Excel as a replacement for an MRP: 

Pros 

1. Cost-effective – Excel is a cost-effective solution for budget-conscious manufacturing businesses, especially smaller organisations that can’t afford the licensing and subscription fees of dedicated MRP systems.  

2. Flexibility and familiarity – Excel’s popularity means that many people have experience of using the software to build spreadsheets, which reduces training needs and enables employees to get up to speed quicker with basic material planning functions. Excel can also be adapted to fit any requirement, from tracking scrap and raw materials to daily job summaries  

3. Templates – One of the main reasons why Excel is so widely used is the range of templates it offers, including for MRP purposes. The templates make it easier to establish a standardised format for data entry and analysis, and can be customised to suit specific requirements. 

Cons 

1. Scalability – The ability to scale software with business growth is crucial for ambitious companies. Excel has limitations in terms of handling the demands of larger teams and more complex, larger scale manufacturing projects or supply chains.  

2. Data integrity and ‘death by data’ – Excel requires staff to input data manually, which in turn leads to a higher risk of human error. Different versions of the same spreadsheet might also make it tricky to know which version is the most accurate and up to date. Being able to capture any and all data in Excel could also lead to losing sight of key information and the bigger picture of what’s happening in your manufacturing operations  

3. Poor analytics and reporting functions – While Excel can create basic charts, it lacks the sophisticated data analysis and reporting capabilities that MRP systems offer. 

What are the Pros and Cons of using MRP for your Manufacturing Operations? 

An MRP system is designed based on industry standards and focuses on key inputs leading to measured outputs. It provides a real-time view of inventory, allocates resources, simplifies bills of materials and orchestrates delivery schedules – all with the aim of meeting production demands and getting things done more efficiently. 

Here are the main benefits and drawbacks of using an MRP system: 
 

Pros 

1. Efficient resource allocation – MRPs helps optimise resource allocation by ensuring that materials and components are available when needed, reducing lead times, and minimising production delays, which can enhance overall operational efficiency.  

2. Stock control – MRP systems provide better control over inventory, reducing carrying costs, stockouts, and overstocking, leading to improved working capital management and increased customer satisfaction.

3. Demand forecasting – MRPs enable more accurate production planning, enabling businesses to match production with demand, reduce wastage and meet customer orders on time. 

Cons 

1. Initial costs – Implementing an MRP system can involve upfront costs, and the transition to a new system may lead to temporary disruption.  

2. Staff training – MRP systems rely on accurate and up-to-date data, making existing data integrity crucial. Data errors or inaccuracies can lead to costly production mistakes and operational hiccups if not managed diligently.  

3. Complexity for smaller businesses – Smaller manufacturing operations with straightforward processes may find MRP systems overly complex and costly, potentially outweighing the benefits of the system's advanced features. 

Key areas to consider when comparing Excel and MRP

Data Management and Accuracy 

Manufacturers that use Excel rely heavily on manual data entry, which can be incredibly time-consuming and prone to human error. Complex manufacturing environments require continuous data input, modification and verification; and even the smallest formula mistake can lead to problems with inventory tracking and material planning. 

We know of manufacturers who have debates internally on whether a spreadsheet should be made available for sharing or whether there should be print outs shared amongst the shop floor. Either approach has risks, and aligning people to the rules around keeping data up to date is always a challenge. 

MRP systems help to ensure data accuracy through real-time synchronisation and seamless integration with other systems, so managers are always working from a single source of truth rather than different versions of the same spreadsheet.  

Scalability and Complexity 

Excel is limited when it comes to managing more complex, larger scale manufacturing projects or supply chains. Spreadsheets can become overly complicated and unwieldy. As operations grow, it’s important to have a system in place that’s agile enough to handle a higher volume of data and more complex tasks. Otherwise, this can lead to longer processing times, bottlenecks and backlogs. 

By contrast, MRPs afford manufacturing organisations far more control over multi-site production, diverse product lines and changing market demands. This is especially important for businesses that have ambitions to scale at pace, because otherwise they risk overloading systems and significant downtime.

Automation and Workflow Optimisation 

Although it offers some basic features, Excel lacks automation capabilities such as being able to easily generate and track work orders, production schedules, inventory levels and resource availability. Again, without automation there’s a higher risk of delays, understocking or overstocking, all of which comprises the efficiency of production. 

Modern MRPs are built specifically with automation and workflow optimisation in mind. Systems can be configured to run on predefined rules and parameters, which reduces the need for frequent intervention and helps ensure compliance at all times. They also offer advanced workflow optimisation features, enabling consistent and controlled processes in material planning and production. 

Stock Management

When it comes to inventory management, MRPs offer quicker visibility and real-time tracking of stock levels and reorder points. Systems can be configured to notify managers of potential stock-outs or instances of overstocking, helping them keep pace with demand and lead times. Some offer in-built demand forecasting and scenario modelling tools, both of which allow manufacturers to prepare for different eventualities ahead of time.

Excel can be used for basic inventory management, allowing users to manually enter and track inventory levels; but unlike an MRP, it doesn’t provide real-time tracking or automated updates. Using Excel can also make it more difficult to manage inventory for items with demand variability, mainly because it doesn’t support dynamic reorder calculations based on changing demand patterns.

Valuable reports such as WIP and stock valuation take time to create and are often inaccurate when working in Excel.

Real-time Tracking and Reporting

Having a real-time view of every corner of their operations is a major advantage for manufacturing managers. While Excel can create basic charts and graphs, it lacks the sophisticated data analysis and reporting capabilities that MRP systems offer – and so more complex reports require a lot more time to pull together manually.

As we’ve already touched on, MRP systems give manufacturers a real-time view of operations, enabling them to make informed, timely decisions and respond quickly to any changes with orders, additional demands or delays. They also tend to offer advanced reporting and data analysis functionalities, making it easy for managers to visualise and share trends and insights with key stakeholders within the business.

Cost Considerations

Excel is a great solution for manufacturing businesses with budget constraints as it doesn't involve the licensing fees or subscription costs associated with specialised MRP systems. This makes it an attractive choice for smaller organisations that are more conscious of costs.

Implementing a dedicated MRP system involves a greater investment in software licensing, setup, training and possibly hardware expenses if an on-premise solution is chosen. However, the long-term cost savings and operational efficiencies gained through an MRP very often justify the spend for manufacturers with more complex material planning needs.

User Adoption and Training

Implementing an MRP system may require a sharper learning curve for staff who are not already familiar with the software. Some employees may initially find it challenging to adapt to a new platform and will need to get up to speed with the new system. On the other hand, Excel is one of the world’s most widely used software packages, which means many employees already have some experience building spreadsheets for various tasks. It’s relatively easy for manufacturers to leverage existing Excel skills to manage basic material planning needs.

Which solution is best for you?

If you’re a small business or startup with very basic material resource planning needs, Excel may be able to serve your business as a cost-effective option. However, for mid-market organisations and larger manufacturing companies, the lack of more advanced functions and capabilities means that Excel probably won’t be fit for purpose – in fact, it may even put your business at risk.

That makes MRP software a worthwhile investment for most manufacturers. Make sure to do your research to find the perfect solution to optimise your operational efficiency, prevent errors and scale with your growth.