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Shortfall - top explanation in 2024

What is a shortage?

The shortage is a shortage of one item.

Shortage costs

Shortage costs arise due to various factors. The shortage costs can be very high if there is a shortfall in production. A shortfall can even bring production to a complete standstill. The costs can amount to several million. Loss of orders, delivery delays, interruption of supply chains, switching to the competition are the consequences in this case.

In shipping logistics, the service level for customers is poor if a shortage occurs. Redeliveries are annoying and cause additional costs. Shortage costs can be enormously high if the customer switches completely 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 demand (incorrect business management). The stock outflow and the expected value in demand can also be incorrectly estimated. 

The occurrence of shortfalls can also be caused by errors made by suppliers in the quantity-dependent supply.

  • wrong disposition
  • Incorrect receipt of goods (wrong product delivered)
  • Incorrect planning and materials management
  • Incorrect stock levels due to picking errors
  • Lack of information

In a warehouse, shortages occur directly during withdrawals and retrievals due to incorrect picking. Several technical systems can be used to reduce shortages: Pick-to-Light, Voice Picking, Pick-by-Point, Pick-by-Frame, etc.

Consequences of a shortfall

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

  • Production stops, delivery delays and material bottlenecks
  • Subsequent deliveries at a later date
  • Discounts due to the difference
  • High shortage costs
  • often a manual material search
  • Disruptions in the production process

Conclusion

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

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