The Hidden Costs of Using Excel for Resource Management
Using Excel for resource management produces errors, eats a massive amount working hours and result into hidden costs that you could easily avoid.
Spreadsheet apps have long worked resource management wonders for companies and the people that power them. They allow a business to set up processes quickly. They’re extremely flexible, etc. At some point, however, spreadsheets can mutate into unrelenting monsters that become unwieldy, produce errors, eat into a massive amount of working hours and, consequently, create considerable hidden costs. More cost-efficient than a spreadsheet application, enterprise-ready applications like the Binocs solution can help improve your bottom line.
When Excel Falls Short
I’ve been using spreadsheet apps throughout my entire career—almost 30 years now. Starting with Lotus Symphony on an IBM PC AT, I then moved on to Lotus 123, and finally, to Excel. I’m still a big fan of them! But, even I have to admit, there’s a limit to the efficiency of spreadsheet apps, including Excel.
Implementing enterprise resource planning (ERP) systems that replace our beloved Excel is often perceived as the business replica of The Inquisition. As someone whose been transforming spreadsheets into enterprise applications for years, I’d say that’s an unfair comparison.
What’s the Truth?
In workforce capacity management, there are often common sources of demand across teams, each of which maintains its own version of input data. Ideally, you want to capture the data once and feed that data across all the delivery teams. Yet, this is often not the case.
Instead, teams frequently—and inefficiently—consult the same data sources separately. They have their own meetings with their own project managers, supply chain planners, etc. They enter their part of the data into their own planning Excel. They create their own Excel data dumps from the business intelligence solution or databases… Does this sound efficient?
→ Let’s assume we have five teams. And that each team spends eight hours per month capturing the same data. That’s 40 lost hours a month.
Data Accuracy Doubt
During consultations, when I try to understand how a team lead works with their planning Excel, I almost always hear: “I should check if my sheet is up to date and if the result is correct, because…”
How confident are teams in their sheets’ input, calculations and outputs? Not very. Basic, simple sheets alleviate much of the uncertainty regarding data accuracy. Yet, it’s also true that these simplistic sheets might produce less added value.
In any case, each time a team consults the output of the planning Excel, we spend time checking if the result is correct.
→ Let’s not exaggerate: The cost is four hours per month, 48 hours per year.
Changing Requirements & Planners
Excel planning sheets don’t come with a manual—they are part of a quest for quick wins. While team leads have a lot of bulletpoints under their job description, making Excel sheets is not one of them. Those who are the brains behind the Excel sheets may (do) move on in a dynamic, changing organization.
What can happen? After a year or two, the resource management sheet is no longer matching the current requirements. Those “brains” that could most easily adapt it are out of sight.
→ Let’s start again, assuming that every three years we have to redo the Excel planning sheet. That initial one-time cost of 40 hours? That becomes a recurring cost.
Capacity Planning Problems
A team lead might ask, “What if we outsource this part of the planning process? Or, what if we train our staff? Should we hire more people?” And then the lights go out because the planning sheet was not built to respond to these kinds of questions.
That’s the point at which team leads make one-time clones of their “operational sheet” and start juggling with data. By the time they must present the data—and they get challenged by their manager—they forgot how they came to the result. It all had to be done quickly, didn’t it?
→ We’ll assume three such questions a year, costing eight hours per incident, ringing up to 24 hours.
Hidden Factory, Visible Costs
In Lean Six Sigma, the Hidden Factory is defined as “the extra useful, positive output that would theoretically be possible if the energy directed at creating waste were released.”
We assume that creating the resource planning sheet is useful. We also assume that entering data and evaluating output to prepare planning decisions is useful. What’s not a good use of resources? If the same tasks are replicated across all teams. For example, if there are five teams, four of them end up as waste.
→ The table below shows how the Hidden Factory cost builds up to $45,000 a year for maintaining Excel planning sheets for five teams of ten people each.
Better Resource Management with Binocs
If you’re looking for an enterprise-ready application as an alternative to Excel-based planning sheets, you should consider Binocs. Our resource demand and capacity planning and scheduling software is specifically tailored for QC labs, R&D labs, cell and gene therapies, regulatory affairs and resource management offices.
Based on our project experience, implementing Binocs in an organization with five teams of about ten people costs about $50,000 for consultancy services. The annual license for Binocs for 50 people will be around $12,000. On a lifecycle of five years, the average cost that compares to our $45,000 in the table above is $22,000 ($50,000 + 5 x $12,000 across 5 years). With Binocs, we reduce the Hidden Factory costs by 50%.
→ Want to know how much savings your lab could make by improving planning and resource utilization with Binocs? Simply fill out five easy questions in our ROI calculator.
Admittedly, there are even more benefits to implementing a resource management solution than those predicted by our ROI calculator, which should serve as an awareness exercise to get a sense of the marginal business case. The true ROI for implementing an enterprise-ready tool for capacity planning like Binocs includes:
- Focus on measurable standard workload and lead times for team deliverables.
- Reduced staffing variability through workload leveling and correct prioritization.
- Collaboration, team flexing.
- On-time and in-full delivery.
- End-to-end business process integration.
- Enterprise-ready workforce scheduling planning solution is an improvement platform, an enabler for the next organizational maturity level.
In many organizations with expensive staffing and volatile resource demand planning, capacity planning tools have a potential of 5% to 10% re-allocatable full-time equivalent (FTE). This annual value of $200,000 to $500,000 goes far beyond the marginal $22,000 in savings we calculated in the Hidden Factory example. It draws the scale between the pragmatics and the believers. Where are you on that scale?
If you want an alternative to the Excel spreadsheet in the above example, get a Binocs demo here!