PRODUCT INVENTORY SYSTEM ON EXCEL

INFORMATION SYSTEM
FINAL PROJECT
Section D
Submitted to:
Prof. ETISHAM UL HAQ

Submitted By:
HAFIZ MUHAMMAD TALHA (L1F18BBAM0100)
MUHAMMAD FURQAN (L1F18BBAM0120)
DANIYAL HAJVERY (L1F18BBAM0129)

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 PRODUCT INVENTORY SYSTEM ON EXCEL

Table of Contents
Scope ............................................................................................................................................... 3
The Critical Elements of a Pretty Good Inventory System ................................................... 3
Item Numbers, Product Codes, UPC Codes, SKU Numbers, Etc… ..................................... 4
Units of Measure ........................................................................................................................ 5
A Good Starting Count ............................................................................................................. 6
A Software System that Tracks all Inventory Activity .......................................................... 6
Creating Policies and Training People about the Entire Inventory System ........................ 6
SUM ........................................................................................................................................ 9
SORT .................................................................................................................................... 10
RANK ................................................................................................................................... 11
At the end we should know about 7 Tips on how to manage your Excel spreadsheet to
ensure you are tracking inventory movement accurately .................................................... 12
1. Avoid pitfalls and mistakes with Excel inventory......................................................... 12
2. Update immediately......................................................................................................... 12
3. Use the cloud .................................................................................................................... 13
4. Take the time to consolidate data................................................................................... 13
5. Review your data ............................................................................................................. 14
6. Audit and review.............................................................................................................. 14
7. Know when to upgrade ................................................................................................... 14
Conclusion ..................................................................................................................................... 15

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Scope
The scope of inventory management concerns the balance between replenishment lead
time, carrying costs of inventory, asset management, inventory forecasting, inventory
valuation, inventory visibility, future inventory price forecasting, physical inventory,
available physical space, quality management, replenishment, returns and defective
goods, and demand forecasting. Balancing these competing requirements leads to optimal
inventory levels, which is an ongoing process as the business needs shift and react to the
wider environment.
Inventory management involves a retailer seeking to acquire and maintain a proper
merchandise assortment while ordering, shipping, handling, and related costs are kept in
check. It also involves systems and processes that identify inventory requirements, set
targets, provide replenishment techniques, report actual and projected inventory status
and handle all functions related to the tracking and management of material. This would
include the monitoring of material moved into and out of stockroom locations and the
reconciling of the inventory balances.
Inventory in excel:
With integrated tools, features, and formulas to make spreadsheets more dynamic and
interactive, Excel is also capable of handling basic inventory management for small
businesses. While not ideal for a medium or large sized inventory, Excel is cost-effective
or, if you use it in One Drive, even free
The Critical Elements of a Pretty Good Inventory System
• Well Organized Location Names
• Location Labels that are easy to read, and unambiguous
• Unique, Short, and Unmistakable Item Numbers
• Units of Measure
• A Good Starting Count
• Software that tracks all inventory activity
• Good Policies
• Most Important: People who know and follow good policies
Before we get into each of the above elements in more detail, let’s take a moment to
explain why these elements are so important. Well Organized Location Names &

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Location Labels that are easy to read, and unambiguous. If an item can be stored
somewhere, that ‘somewhere’ must have a name, and it should be labeled with that name.
If it doesn’t, time will be wasted looking for things. People will stock things in the wrong
place. Locations will get referred to by more than one name, and your inventory will be
in constant drift towards disorganization. Remember, any open space can potentially
store stuff, so label ALL of your storage locations, not just the ones that currently have
stock. An open aisle? Name it, label it. An empty corner? Name it, label it. The tiny water
heater closet? Name it, label it. And don’t pick just any name. You must have some logic
to your location naming scheme. If you don’t, you’re setting yourself up for frustration in
ways that are difficult to anticipate. We’ll give you some advice on a naming scheme
later in this guide to inventory basics. No matter what you decide to call your locations,
make sure they’re all labeled, and all the names are unique.
Labels that are easy to read help everyone work faster. For example, if the letters on your
labels are so small that you have to be two feet away to read them, or if the labels blend
in with rack colors, etc… You’ll be slowing down your operations and opening up
yourself to mistakes.
Labels that don’t clearly state which location they’re referring to (i.e. shelf labels, with no
arrows, and shelves above and below) will cause the same delays and errors as poorly
printed labels.

Item Numbers, Product Codes, UPC Codes, SKU Numbers, Etc…

Item numbers help uniquely identify items, but one of their greatest benefits is lost on
people who haven’t used a software system to track their inventory: they serve as a
shorthand, or abbreviated item description. When you are searching your inventory,
making transactions, filling orders, filtering or searching reports, item numbers really
come in handy. Instead of typing descriptions that can be hundreds of characters long,
and hard to distinguish at a glance, most companies can use items numbers of only five or
six characters or numbers in length. It makes it easier to use your inventory software, and
anything that makes something easier, improves the chances that it will get done. For
more tips, refer to our other guides in the Inventory Basics section under Resources.

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Units of Measure
Units of Measure, things like “pcs” “ea” “lbs” “bags” etc… give meaning to quantities.
These units belong in their own separate place, outside of descriptions and the numeric
quantity fields. Using well created and consistent units of measure will make stock levels,
shipping quantities, and ordering quantities, easier to understand.

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A Good Starting Count

Loading data into a new inventory software program is an excellent time to get a good
count of your stock levels. Once you have labeled your locations, cleaned up your
descriptions, created item numbers, and consistent units of measure, getting a good stock
level count will be easier, faster, and better organized.

A Software System that Tracks all Inventory Activity

If you’re reading this guide to inventory basics, you probably realize that keeping your
inventory data with pen and paper, or on a spreadsheet, just won’t cut it. Good inventory
software will make it easier for you to to track your inventory and allow many users
access to it. It also provides insight to your inventory activity, and helps keep an accurate
historical record of what’s happened.
Creating Policies and Training People about the Entire Inventory System
The people who work with your stock and use your inventory system are the most critical
element in establishing a pretty good inventory management system. You must make sure
that these people know what to do with items that are received, removed, reserved for
future use, required for production. They also must know who is responsible for making
certain transactions, etc… In some cases this may only be one or two people, but there’s
nothing wrong with writing down your policies and making sure they are followed. You
may want to share this guide to inventory basics with them to reinforce the point. If you
or the people you work with aren’t consistent in the way inventory is handled, it won’t
matter what software you use, you will only experience frustration and failure.

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Creation of inventory:
There are several step which have to be done while starting an inventory
➢ Add category and suppliers
➢ Add items
➢ Add purchases
➢ Add sales prices
➢ Add report

Inventory management is the operational backbone of any business with

a product to sell. If you are just starting out with a small number of
products without many variants.
If you’re looking for a low-cost way to manage your inventory, Excel
could be a good solution. It’s a program that most of us are already
familiar with, whether for accounting or spreadsheet forms, and it is an
alternative option for applications like inventory management. With
integrated tools, features, and formulas to make spreadsheets more
dynamic and interactive, Excel is also capable of handling basic
inventory management for small businesses. While not ideal for a
medium or large sized inventory, Excel is cost-effective or, if you use it
in OneDrive, even free.

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Like anything that’s free or cheap, Excel isn’t perfect inventory

management, but it has plenty of valuable features. While it is easy to
make mistakes in Excel (and avoiding them will require time-consuming
auditing, proper organization, and strict management), it is fully capable
of handling a startup businesses inventory.

Setting up your Excel inventory list template

A basic template for your Excel inventory should include the product
number, product name, item description, item price, item cost or value,
item stock, quantity to reorder, and, if you want to update sales quantity
or value, quantity sold. Time to reorder, whether or not the product has
been discontinued, total inventory value, and other functions are also
very useful, but the more columns you have, the more difficult it is to
keep up with everything.
You can then use Excel formulas to automatically calculate information
for total sales, total profit, and organize your inventory based on products
that sell the most using a few simple formulas. You can modify
Microsoft's basic free template (available when you open Excel) to your
needs, purchase a template, or create your own.

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Formulas can increase the value of your Excel spreadsheet while

reducing the headache and stress involved with calculating numbers.
While they may seem a little complex at first, don’t worry; most of them
are easy to get the hang of.
SUM
The SUM function can be used to add any figures that you put into two
or more cells. For example, you can create a running sales quantity using
the SUM function to automatically update how much revenue you've
earned by doing math based on calculations you put in per line. This
removes the need to go over each line with a calculator every night.
A SUM formula is written as =Cell*Cell. This can also work out to =[@[Name of
Column]]*[@[Name of Column]] to simply multiply any two cells in a row.
This is very useful for creating automatic value totals for the products in
your inventory. Keep in mind, though, that if you have 300 lines, you
will have to add it to each one. For example, if your products are worth
$27 each and your in-stock number is 65, the SUM function would
automatically update the 'inventory value' section to $1,755 (65 x $27).

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SORT
Sort allows you to order your inventory by number size, or by color, so
that you can see products based on sales, profitability, or remaining stock
to quickly and easily go through products. Not surprisingly, the sort
function will be incorrect if any of your data is entered incorrectly.
If you use a subtraction formula (=B1-B2) when you input how many
items you sold, it will automatically deduct that number from your
current stock number, which you can then use to sort based on stock, so
that you can see which items you have the least of. This also
conveniently circumvents issues surrounding not ordering products
because you don’t know which ones you need to order.

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RANK
Rank allows you to rank items based on sales quantity, inventory
quantity, or the number of products you have received. Because it makes
the most sense to rank high-sale items that you have to restock on the top,
you can use it to organize your inventory based on either specification.
Rank differs from Sort because Sort organizes your data in order when
you tell Excel to do so by clicking “Sort”, while rank does so
automatically. Interestingly, it doesn’t automatically adjust the order, so
your #1 could still be in the middle of the page. Your rank formula
should be written like this: =Rank (Cell, Cell:Cell), where the cells
mentioned include all of the cells you want to rank.

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At the end we should know about 7 Tips on how to manage your

Excel spreadsheet to ensure you are tracking inventory movement
accurately
1. Avoid pitfalls and mistakes with Excel inventory
Many professionals avoid using Excel for inventory management for the
simple reason that humans are error-prone. Finding errors on sheets of
numbers and hard data is also difficult unless you know exactly what
you're looking for. The only way to avoid this is to create a best practice
of self auditing and daily review to minimize errors.
2. Update immediately
Make sure that anyone handling orders updates the Excel document
immediately to prevent issues. Excel is not a real-time inventory
management solution, so you will never be able to see the real inventory
value at that moment, but it’s important to make sure that it is updated as
often as possible to circumvent issues like overselling a product that you
cannot backorder.

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3. Use the cloud

Traditional offline Excel documents are severely limited because only
one person can use the sheet at once. Using Excel in the Cloud
(OneDrive) or Google's alternative, ensures that you can invite multiple
people to the sheet and edit it at once to improve self-auditing, input data
from multiple sources, and speed up processes. It also comes with the
added benefit of automatic backups and syncing across all of your
devices so that you can edit on an iPad, or on your computer at home.

4. Take the time to consolidate data

Taking the time to consolidate your data monthly allows you to create
charts that outline how much you sold in each period. You should do this
monthly and quarterly, paying special attention to holidays and
occasions.
One of the biggest issues many people have with Excel is not being able
to easily analyze your historical data – but taking the time to add your
entire month's data into an easy-to-read pivot table will fix this. It is time
consuming, but it allows you to track your sales based on period, and
during different seasons, for better inventory optimization in the future.
Here’s how to create a pivot table in Excel:
1. Click 'Insert', Choose 'Tables', select 'PivotTable'. (click the arrow
below PivotTable to create a chart.
2. Select the table range (I.E. 1A-21G) in the Create Pivot Table dialog
box that pops up.
3. Choose the location of the new pivot table (new worksheet or existing
one).
4. Click 'OK'.
5. Customize your Pivot Table as needed.

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5. Review your data

Excel can be a valuable tool for tracking inventory, but it is up to you to
make sure that you are tracking and calculating everything necessary. For
example:
• if you're tracking time to reorder, have you included lead times (time from
manufacturer to warehouse or 3PL) in your calculations?
• Are you calculating profits based on sales, or based on your actual per-item profit?
• Are you using your inventory to calculate sales tax immediately?
• Is your total inventory value based on resale or purchase value?
Going over the figures you use in your calculations to ensure that they
are correct can save you expensive and time-consuming mistakes in the
future.
6. Audit and review
Excel relies on people to input data unless you have a barcode scanner
connected to your system, and even then, not everything is automated.
This will lead to human error, which can throw off your entire supply and
demand when you reorder too much or not enough, or under- or
overestimate profits.
A policy of keeping track of everything on paper as well as in your Excel
document allows you to go over your inventory at the end of each day to
correct any mistakes.
7. Know when to upgrade
Excel simply does not work with medium to large inventory volume
because hundreds of columns are too complex, time consuming and
difficult to keep track of and up-to-date. At some point, you will have to
upgrade to a dedicated inventory management system, and you should
know when to do so.

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Conclusion
An efficient inventory management system accurately forecasts how much inventory you
will need based on sales activity. This way, you can place orders accordingly to prevent
overstock and stockout. You must understand how much demand consumers have
for a product as well as the product's depreciation rate. This software is very important
for product-oriented business.

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