Overage and Shortage

Inventory management is a key aspect of a supply chain.
A distributor orders 10,000 units of their best selling item. When the shipment arrives in their distribution center, it is identified that 11,000 units were received. 
Their database is updated to reflect the 11,000 units so that the sales team can access the entire inventory and not just the 10,000 units originally ordered.
OR...
When the shipment is received, it is identified that only 9,000 were shipped...

What courses of action does this distributor take?
I am almost certain that when it is identified that only 9,000 units were received, the distributor will be demanding a credit note from their vendor for those 1,000 units not received. 
Similarly, there should be communication with the vendor when an extra 1,000 units "appeared" in the shipment!

Let's look at it from a Customs (Canada Border Services Agency -- CBSA) perspective...
If there was an overage of 1,000 units, the importer is obligated to initiate a declaration on those extra 1,000 units.
If there was a shortage of 1,000 units, the importer should initiate a claim with Customs to obtain a refund of any applicable duties that were paid on those 1,000 units. Interestingly enough, if the item in question has a zero percent (0%) rate of duty, then this amendment with Customs is now obligatory in order to realign the Good and Services Tax (GST) appropriately even though the actual claim with Customs is defined as a "non-revenue adjustment".

Think about that...
An over-declaration of goods where no duties were paid on the original entry obligates the importer to initiate corrective action with Customs to align the entry correctly with the GST even though GST is not refunded by Customs nor are there any monetary implications to Customs.

If the vendor does ship those extra 1,000 units, what is the proper way to declare those units to Customs? The question arises because these units were already technically declared?
The proper process is to amend the original declaration and then initiate a new accurate declaration on this second shipment with the 1,000 units.
If the vendor chooses to issue a credit note, there are instances when the credit will be listed on a subsequent shipment of goods. An importer cannot lower the value of the second shipment with this credit note. The importer is to declare the full value of the shipment and then utilize the credit note to adjust the declaration on the first shipment.

All these scenarios are quite labor intensive, confusing, and a road to non-compliance if the importer/distributor is not constantly aware of the regulations and monitoring the inventory receipts on a shipment by shipment basis.

 

With cooking there is also an aspect of "overage" and "shortage". Think about salt content. If there is not enough salt, the taste may be bland and unappealing. However, too much salt and the whole dish may not even be edible.
Understanding the quantities of ingredients to place in a dish is important to achieve the desired taste.

As we are now in the midst of football playoffs, chicken wings usually hit the menu for one or two Sunday evening dinners.

I used "The Silver Platter - Simple to Spectacular" cookbook for some recipes recently.
- Page 32 and 33 for the wings
- Page 126 fir the chicken rice noodle stir-fry
( https://www.amazon.ca/Silver-Platter-Spectacular-Wholesome-Family-Friendly/dp/142261557X ) 

Both recipes have various sauces and spices to use so I had to be mindful about using too little versus not using too much!

Overages and shortages...
It can drastically change a dish from remarkable to rotten.

Keep in mind that overages and shortages can also be quite cumbersome to monitor from a supply chain compliance program perspective. This is where accuracy and meticulous reporting will allow for a first class compliance program to flourish.



Shout out to my colleague Katie Husband for providing the insights about overages and shortages. Thank you Katie!

Location: Montreal, QC, Canada

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