In 2022, retailers lost $112.1 billion to inventory shrinkage, with concealed shortages playing a major role. Another $163 billion in wasted inventory comes from supply chain inefficiencies like overproduction and spoilage. These hidden losses disrupt operations, strain vendor relationships, and lead to costly disputes.
Why do concealed shortages keep happening, and what can businesses do to stop them? Let’s break it down.
A concealed shortage refers to missing inventory that is not immediately apparent upon delivery but is only discovered later during unpacking, pallet breakdown, or order fulfillment. These shortages often remain undetected at the time of receipt, making them difficult to report and dispute.
Unlike visible shortages, which can be identified and documented upon arrival, concealed shortages create a more complex challenge. Since the shipment appears intact when received, discrepancies are only noticed after the delivery has been signed off, leaving suppliers responsible for the loss.
Some of the most common causes of concealed shortages include:
Concealed shortages happen at different stages of the shipping process, often going unnoticed until unpacking:
A supplier ships 1,000 units of a product to a Walmart distribution center. Upon delivery, Walmart verifies the shipment based on the pallet and carton count, signs off on the Proof of Delivery (POD), and accepts the order without noting any discrepancies.
A few days later, as Walmart unpacks the shipment and distributes items to individual stores, they discover that some cartons contain fewer units than expected. For example, a carton labeled to hold 50 units only contains 45. This shortage was not visible at the time of delivery, making it a concealed shortage.
When a concealed shortage happens, invoices, Proof of Delivery (POD), and Bills of Lading (BOL) become the backbone of any dispute. Without these documents, proving that items were missing after unpacking is nearly impossible.
Invoices provide the baseline for what was supposed to be delivered. If an invoice shows 500 units shipped but only 480 are found after unpacking, it becomes the starting point for a claim. However, invoices alone aren’t enough as retailers and suppliers need additional proof to challenge deductions successfully.
PODs confirm that a shipment was received, but they don’t always reflect shortages found later. If a warehouse signs off on delivery without unpacking every box, any missing items become the supplier’s problem. This is why tracking exceptions at delivery, such as damaged packaging or missing pallets, is crucial for strengthening a shortage dispute.
BOLs act as legal proof of what was handed off to the carrier. If the BOL matches the invoice but the received goods don’t, it indicates an issue that occurred in transit or at the warehouse. Comparing the BOL with inventory records helps pinpoint where the shortage happened.
Retailers like Walmart, Target, and Amazon apply deduction codes when shipment discrepancies happen. Understanding these codes helps suppliers dispute invalid deductions efficiently.
Walmart:
You can dispute them via the APDP Portal. For a step-by-step guide, check out our in-depth blog post where we walk you through the entire dispute process with screenshots and best practices.
Read an in-depth guide on Walmart Deduction Codes here.
Target:
You can dispute them via the Synergy System. To see a detailed tutorial on how to navigate the system and submit a successful dispute, visit our blog post.
Amazon:
You can dispute them via Vendor Central. If you need a thorough breakdown of each step, including document requirements and tips for faster resolution, check out our detailed blog post.
Shortage Deductions: Fewer items received than invoiced
Managing freight claims manually is a slow, labor-intensive process that creates bottlenecks for suppliers. Common challenges include:
Without a streamlined approach, these inefficiencies lead to revenue loss, longer resolution times, and strained vendor-retailer relationships.
Frequent concealed shortages create more than just financial losses: they lead to long-term operational and strategic challenges that many suppliers underestimate.
iNymbus is a cloud-based automated deduction management software designed to simplify and accelerate the dispute process for suppliers. By eliminating manual effort, businesses can recover revenue faster and focus on core operations.
Key benefits of iNymbus include:
By using automation, suppliers can minimize workload, reduce errors, and maximize recovery on shortage claims.
1. What does concealed damage mean in shipping?
Concealed damage refers to damage that is not visible at the time of delivery but is discovered later when unpacking the shipment. This makes it difficult to prove that the damage occurred during transit rather than after delivery.
2. Can I file a claim for a concealed shortage?
Yes, but it can be challenging. You’ll need supporting documents like invoices, Proof of Delivery (POD), and Bills of Lading (BOL) to dispute the shortage with the carrier or retailer.
3. How long do I have to report a concealed shortage?
The timeframe varies by carrier and retailer. Some require claims within a few days, while others may allow up to 30 or 60 days. It's best to check their specific policies and report shortages as soon as they are discovered.
4. How can I prevent concealed shortages in my shipments?
To reduce the risk of concealed shortages, implement strict packing controls, conduct thorough receiving inspections, and use inventory tracking systems to monitor discrepancies.