Shortage

What is a shortage?

The shortage is a shortage of one item.

Shortage costs

Shortage costs are caused by different factors. In the demand of a production, the shortage costs can be very high in case of a shortage. A shortage can even cause a complete shutdown of production. The cost can be the amount of several millions. Loss of orders, delay in delivery, interruption of supply chains, switching to the competition are the consequences in the case.

In shipping logistics, the level of service for customers when a shortage occurs is poor. Subsequent deliveries are annoying and cause additional costs. The shortage costs can be enormously high due to complete switching of the customer to the competition.

Why do shortages occur?

Shortages are caused by incorrect materials management and faulty procurement. The cause is a too small book stock in comparison to the demand (wrong business management). Also the stock outflow and the expected value in the demand can be also wrongly estimated. 

The occurrence of the shortages may also be due to supplier errors in the quantity-based supply.

  • wrong disposition
  • Incorrect receipt of goods (wrong product delivered)
  • Faulty planning and materials management
  • Incorrect stock levels due to errors in picking
  • Information deficiencies

In a warehouse, the shortages in picks and retrievals occur directly due to incorrect picking. To reduce the shortages, several technical systems can be used: Pick-to-Light, Voice Picking, Pick-by-Point, Pick-by-Frame, etc.

Consequences of a shortage

A shortage can have very different effects (here only as an example):

  • Stop of production, delivery delay and material shortages
  • Subsequent deliveries at a later date
  • Price discounts due to the difference
  • High shortage costs
  • often a manual material search
  • Disturbances in the production process

Conclusion

A shortage causes shortage costs, delivery delays, material bottlenecks and should be kept to a minimum in inventory management at all costs. Production interruptions are the consequences. If the inventory is too small, there is a delay in delivery in the order (shortfall). The occurrence of material shortages is always very important for companies.

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