Shortfall

What is a shortage?

The shortage is a shortage of one item.

Shortage costs

Shortage costs arise from 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 costs can be in the millions. Loss of orders, delayed deliveries, interruption of supply chains, switching to the competition are the consequences in this 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 book inventory that is too small compared to the demand (incorrect business management). The stock outflow and the expected value in demand can also be incorrectly estimated. 

The occurrence of the shortages can also be caused by 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
  • Lack of information

In a warehouse, shortfalls in withdrawals and stock removals occur directly as a result of incorrect picking. Several technical systems can be used to reduce the shortages: Pick-to-Light, Voice Picking, Pick-by-Point, Pick-by-Frame, etc.

Consequences of a shortfall

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

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

Conclusion

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

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