What is a shortage?
A shortage refers to a shortfall in the stock of an item.
Costs of stock shortages
Shortage costs arise from various factors. In a production setting, shortage costs can be extremely high when a shortage occurs. A shortage can even cause production to come to a complete standstill. The costs can amount to several million dollars. In such cases, the consequences include lost orders, delivery delays, disruptions to supply chains, and customers switching to competitors.
In shipping logistics, the level of service for customers is poor when there are shortages. Backorders are frustrating and result in additional costs. The costs associated with shortages can be extremely high if customers switch entirely to competitors.
Why do inventory shortages occur?
Shortages result from poor inventory management and flawed procurement. The cause is an inventory level that is too low relative to demand (poor business management). Additionally, both inventory outflows and the expected demand may be miscalculated.
Shortages can also result from errors made by suppliers in quantity-based supply.
- incorrect scheduling
- Incorrect receipt of goods (wrong product delivered)
- Poor planning and materials management
- Incorrect inventory levels due to picking errors
- Lack of information
In a warehouse, stock shortages occur directly during picking and putaway due to incorrect picking. To reduce stock shortages, several technical systems can be used: Pick-by-Light, Voice Picking, Pick-by-Point, Pick-by-Frame, etc.
Consequences of a shortage
A shortage can have a wide range of consequences (here are just a few examples):
- Production stoppages, delivery delays, and material shortages
- Subsequent deliveries at a later date
- Discounts Based on the Difference
- High costs associated with stock shortages
- often a manual search for materials
- Disruptions in the production process
Conclusion
A shortage leads to shortage costs, delivery delays, and material shortages, and must be kept to a minimum in inventory management. Production interruptions are the result. If inventory levels are too low, it leads to a delivery delay for the order (shortfall). Material shortages are always of great significance to companies.