Shrinkage Policy
How Founders 3PL measures, reports, and accounts for inventory shrinkage under our cost-plus model.
Shrinkage Allowance
Armbrust allows a shrinkage allowance of up to one percent (1%) of total on-hand inventory at any time, measured on a rolling basis through cycle counts and physical inventories. Losses within this allowance are not Armbrust's responsibility.
Shrinkage is measured against total on-hand inventory using rolling cycle counts and physical inventories. The 1% allowance is the industry-standard threshold.
Receiving Reliance and Sealed-Case Policy
Unless the customer expressly requests an enhanced receiving service that includes opening master cases and unit-level counts, Armbrust receives by pallet and carton count. We rely on the Bill of Lading, ASN/packing list, and carrier proof-of-delivery as the authoritative receiving record for quantity. Sealed cases are not opened or unit-counted by default.
Any variance between the units represented on the case label or packing list and the units actually inside a sealed case is a vendor or manufacturer issue and is not counted as shrinkage. Case-open inspections are available upon request at Cost Plus.
Exclusions from Shrinkage
Shrinkage calculations exclude, and Armbrust is not responsible for, the following categories of variance:
- Manufacturer-supplied quantity errors such as short-pack, over-pack, mislabeled inner counts, or incorrect UPC/SKU mapping
- Documented carrier shortages or in-transit damage noted at receipt or confirmed by carrier post-audit
- Concealed shortages inside sealed master cases discovered after put-away
- Data inaccuracies provided by the customer, including SKU, dimensions, or weights used for billing
Armbrust documents and promptly notifies the customer of such variances. Claims for excluded categories are solely between the customer and its vendor or carrier, with Armbrust assisting as provided in the agreement.
Credits for Losses Above the Allowance
For verified inventory losses exceeding the 1% allowance and not falling within the exclusions above, Armbrust issues a credit against General Conditions (Cost + 20%) calculated at the customer's landed cost and capped at $1.00 per pound of affected product. Credits are net of any amounts recovered from carriers or vendors and are applied when received. Accounts must be current for credits to apply.
| Scenario | Responsibility |
|---|---|
| Losses within 1% allowance | Not Armbrust's responsibility |
| Verified losses above 1% | Credit at landed cost, capped at $1.00/lb |
| Manufacturer short-pack or mislabel | Vendor issue — customer files claim |
| Carrier shortage or transit damage | Carrier issue — Armbrust assists with documentation |
| Concealed shortage in sealed cases | Vendor issue — not counted as shrinkage |
Casualty and Insurance
In the event of fire, flood, theft, or similar casualty, the customer must carry its own inventory insurance. Any claim for recovery must first be made through the customer's insurer. Armbrust has no liability for damage or destruction of customer inventory beyond what is covered by and recoverable under such insurance.
Documentation and Timing
Upon request, Armbrust provides photo evidence and receiving records to support vendor and carrier claims. Research time is billable at Cost Plus. Customers must submit vendor or carrier claims within their required windows. Armbrust files freight claims where Armbrust is the shipper of record.
Transparency in handling shrinkage is not just a policy; it's a commitment to our clients.
Philip Quick, Founders 3PL
