Shortfall: Missing the mark
Functional trading or shipping of goods requires that the underlying procurement or warehousing has sufficient corresponding goods on hand. However, if the quantity specified in the order or purchase order is not available in full on the agreed date, this is referred to as a shortage. Unlike overstock, which refers to an excess of goods, shortage challenges the company to meet its needs or fulfill its obligations to customers.
Example from production
A typical example from production would be when important raw materials, auxiliary materials or operating materials are not sufficiently available at the respective time. Reasons for such shortfalls can include supply bottlenecks or supply chain disruptions, but also market capriciousness, so that the company's materials management is not able to procure the required quantities accordingly.
A shortfall can sometimes still be corrected, for example by switching to other suppliers. However, reduced delivery capacities or production errors on the part of an upstream supplier can also lead to corresponding shortfalls in production.
Important: Shortfalls are sometimes associated with high costs, especially in industries where processes are highly synchronized and depend on a steady flow of goods. For example, when machines have to be stopped, employees cannot produce goods or penalties have to be paid to purchasers.
