FULFILLMENT & OPERATING CONTROL
Shrinkage
Inventory shrinkage is an unexplained or otherwise recognized loss between expected inventory and the physical or supported balance, measured using a stated counting and valuation basis. Causes can include loss, damage and transaction errors.
SHRINKAGE IN PRACTICE
- Establish the baselineAlign expected stock and cutoff.
- Investigate differencesTrace movements and physical counts.
- Approve the outcomeDocument cause and adjustment.
Use the agreed units, actual records and approved procedures for your operation.
A WORKED EXAMPLE
100 expected. 96 counted.
A controlled count finds 96 eaches against an expected 100. The initial variance is four eaches. An investigation finds a posted shipment using the wrong unit conversion; the corrected records may change the apparent loss. If a shortage remains, document its cause and authorized treatment.
WHAT THIS MEANS FOR YOUR QUOTE
Agree the requirement before comparing quotes
Use the actual shipment, stock and service requirements. Record the billing unit, included work and responsibility for exceptions.
A LITTLE MORE CONTEXT
Questions about Shrinkage
Does shrinkage always mean theft?
No. Investigate errors, damage, timing and other possible causes.
Is every variance a physical loss?
No. A record or conversion error can create an apparent shortage.
Is the liability allowance universal?
No. Review the actual contract and relevant circumstances.
Source & example notes
Definition and operational example prepared by 3PL Hub. Examples describe hypothetical requirements; verify the actual records and agreed procedures for your operation.
Quantities, costs and scenarios are illustrative, not operating targets, approved handling instructions or guarantees. Source guidance reviewed 23 October 2026.
Last updated: · 3PL Hub
