Shortage costs

Definition of shortage costs

Shortage costs are costs that are incurred if the procured material does not meet production requirements, which means that the service process is wholly or partially interrupted. The shortfall is therefore the material requirement that exceeds the available amount of material.

Amount of shortage costs

The amount of the shortage costs depends on:

  • Possibilities of postponing or changing the planned production process,
  • the duration of the disturbance, e.g. B. has caused a standstill in production.

Reasons for shortage costs

Reasons for shortage costs can be:

  • Price differences if higher value goods are used to rectify the fault
  • Lost profits if not manufactured and therefore not sold
  • Contractual penalties to be paid to the customer in the event of non-delivery
  • Loss of goodwill that leads to a negative company reputation and causes customers to procure the required material elsewhere.

Degree of readiness for delivery of shortage costs

the Delivery readiness level also has an impact on the amount of the shortage costs:

  • A high degree of delivery readiness - e.g. B. 90 % - leads to low costs for shortages.
  • A low level of delivery readiness - e.g. B. 50 % - considerably increases the risk of higher shortage costs for the company.
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