Shortfall

Shortfall: missing the mark

A functioning trading or shipping of goods presupposes that the underlying procurement or warehousing holds sufficient corresponding goods. However, if the quantity specified in the order or purchase order cannot be delivered in full on the agreed date, this is referred to as a shortfall. Unlike excess stock, which refers to an excess of goods, shortfall presents the company with the challenge of meeting its needs or fulfilling its obligations to customers.

Example from production

A typical example from production would be that important raw materials or supplies are not available in sufficient quantities at a given time. Reasons for such shortfalls can include supply bottlenecks or disruptions in the supply chain, but also market caprices, meaning that the company’s materials management is unable to procure the required quantities.

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: Shortages are sometimes associated with high costs, especially in industries where processes are highly synchronized and rely on a constant flow of goods. E.g., when machines have to be stopped, employees are unable to produce goods or penalties have to be paid to customers.