What is Shrinkage

Introduction

Shrinkage is the the reduction of a commodity's quantity (mass) due to factors such as moisture, handling and waste, but does not include damaged commodity. Therefore, in stock management at sites and storages, shrinkage and its associated rates are an important factor to consider for accurate inventory and stock levels.

When is Shrinkage Applicable?

Applicable Scenarios

• OUTLOAD: When a movement (load) is being outloaded and it involves a title transfer from a Grower.
• INLOAD: When a load is being inloaded and it involves a Non-grower OR a title transfer from a Grower to a Non-Grower.

Non-Applicable Scenarios

• CONTAINER LOADS: Shrinkage is not considered for container loads.
• STOCK UPDATES: Loads created through stock updates, re-grading, re-seasoning, or stock swaps do not involve shrinkage.
• OWN LOADS: When the storage and NGR (ownership) belong to the same company, or in title transfers where the Seller and Buyer are the same entity.

How is Shrinkage Calculated?

Shrinkage is calculated as a percentage of the net weight (actual weight recorded at the weighbridge).

The following process outlines how shrinkage affects different scenarios.

Scenario 1: OUTLOAD (Grower Outload - Title Transfer)

• Net Weight: This is the actual load weight recorded at the weighbridge.
• Shrinkage Load Weight: On the platform, a separate load is created for the shrinkage, recorded against the BHC (Bulk Handling Company). The shrinkage load weight is calculated using the shrinkage rate (%) nominated at the site and net weight.
  
• Stock Deduction: The owner's stock is reduced by the net weight minus the shrinkage load weight to give the load's final weight during outload.

Final Outload Weight (MT) = Load Net Weight (MT) - Shrinkage Load Weight (MT)

where Shrinkage Load Weight (MT) = Nominated Shrinkage Rate (%) x Load's Net Weight (MT)

Scenario 2: INLOAD (Non-grower Inload or Title Transfer from Grower to Non-grower)

• Net Weight: This is the actual load weight from the weighbridge, unshrunk.
• Shrinkage Load Weight: On the platform, a separate load is created for the shrinkage, recorded against the BHC (Bulk Handling Company). The shrinkage load weight is calculated using the shrinkage percentage (rate) nominated at the site and net weight.
• Stock Increase: The owner's stock is increased by the net weight minus the shrinkage load weight to give the load's final weight during inload.

Final Inload Weight (MT) = Load Net Weight (MT) - Shrinkage Load Weight (MT)

where Shrinkage Load Weight (MT) = Nominated Shrinkage Rate (%) x Load's Net Weight (MT)

Case Examples

Case 1: Grower Inloads 100 MT at BHC

• Inload: The grower views 100 MT in stock, with no shrinkage rate applied at this stage.
• Outload (99.3 MT): When the Grower outloads, shrinkage is applied and so the grower will see 99.3 MT.
• Title Transfer to Non-Grower: The Buyer receives 99.3 MT after shrinkage.
• Title Transfer to Grower: The Buyer (if also a Grower) receives the full 100 MT.

Case 2: Non-grower Inloads 100 MT at BHC

• Inload: Shrinkage is applied during inload, so the Non-grower views 99.3 MT in stock.
• Outload (99.3 MT): No further shrinkage is applied during outload.
• Title Transfer to Grower/Non-grower: The Buyer receives 99.3 MT, whether they are a Grower or Non-Grower.

Summary

On AgriChain, Shrinkage is only relevant under specific circumstances related to outloads and inloads.

For Growers, Shrinkage is applied on OUTLOADS but not inloads.

For Non-Growers (e.g. Traders/Buyers), Shrinkage is applied during INLOADS but not outloads.

Common Questions

Currently, the Sites that our company manages applies Shrinkage Rates to all inloads by both Growers and Non-Growers alike. How do I go about managing this?

Currently separate Shrinkage rules are applied for Grower and Non-growers. 

To apply Shrinkage Rates for ALL inloads by Growers and Non-Growers alike at your Sites, please submit a ticket and request a Setting change. We will then have Shrinkage Rates applicable to all inloads regardless of entity type at your Sites.