3PL Warehouse Inventory Doesn't Match: Who Is Liable in Korea?
BySangjin Ji, Administrative Attorney3 years of embassy visa practiceLinkedIn
As an online retail business grows, handling every order, packaging task, and shipment internally can become difficult.
Cosmetics brands, consumer goods companies, and online sellers often turn to third-party logistics (3PL) providers or fulfillment services to manage receiving, storage, picking, packing, shipping, and returns.
When selecting a logistics partner, the first questions usually concern storage fees, fulfillment charges, and delivery costs.
Inventory management is included in the service, so it is tempting to assume that the stock records will remain accurate.
But what happens when the numbers do not match at the end of the month?
You open the logistics agreement and find a clause stating:
Inventory discrepancies shall be resolved through mutual consultation between the parties.
That sounds reasonable.
But what records will the parties actually compare?
Consider a business whose inventory system shows 1,200 units remaining.
Its logistics provider's warehouse management system shows 1,150 units.
A physical stock count identifies only 1,130 units.
Does this mean the warehouse provider must compensate the business for 70 missing units?
Not necessarily. A difference in inventory records does not automatically establish that goods have been lost.
There are two separate discrepancies.
The company's records differ from the warehouse records by 50 units.
The warehouse records differ from the physical stock count by another 20 units.
Each discrepancy may have a different cause.
Before calculating compensation, the business needs to establish when and where the records stopped matching.
That means tracing confirmed receipts, authorized shipments, returns, inventory adjustments, and physical stock counts.
Only then can the parties determine whether the problem involves delayed system updates, an unclear transfer of custody, or goods that can no longer be returned.
Three Inventory Numbers, Three Different Records
Let us return to the example.
The company's system shows 1,200 units.
The logistics provider's records show 1,150.
The physical count shows 1,130.
The company may use an enterprise resource planning (ERP) system to manage purchases, sales, and inventory.
The logistics provider may use a warehouse management system (WMS) to record receiving, storage, picking, and shipping.
A physical stocktake involves counting the goods actually present in the warehouse.
These records do not necessarily change at the same moment.
Why are the company's records 50 units higher?
Suppose the warehouse has already recorded the dispatch of 50 units, but the company's ERP has not yet reflected that shipment.
The company's recorded inventory would be 50 units higher than the warehouse balance.
A similar discrepancy may arise if a cancelled order is restored to inventory in one system but not the other.
Returns may also be recorded at different stages.
One system might update inventory when the return is registered, while the other waits until the returned goods have been physically inspected.
These possibilities should be checked against the actual records rather than assumed to be the cause.
Why are another 20 units missing from the physical count?
The remaining 20 units raise a different question.
Some goods may have been moved to another shelf or storage area.
Damaged products may have been separated from saleable inventory.
The warehouse may have recorded cartons while the physical count was conducted in individual units.
It is also possible that goods were incorrectly dispatched or genuinely lost.
The purpose of reconciliation is to distinguish these possibilities.
Start by using the same cutoff date and time.
Then align the stock keeping unit (SKU), product option, and unit of measurement.
The question is not which system looks more reliable. It is where the discrepancy first appeared and which records explain it.
Recording all 70 units as lost inventory before completing that comparison could combine a bookkeeping difference with a genuine physical shortage.
Why Inventory Records Matter as Logistics Volumes Grow
South Korea's logistics and e-commerce markets handle substantial volumes of goods.
According to statistics published through the National Logistics Information Center, using data from the Korea Integrated Logistics Association, domestic parcel volume reached approximately 6.41 billion parcels in 2025.
That represented a 7.75% increase from approximately 5.95 billion parcels in 2024.
Korea's official annual online shopping statistics also reported transaction value of KRW 272.0398 trillion in 2025, an increase of 4.9% from the previous year.
Sources: National Logistics Information Center, Annual Parcel Delivery Statistics (underlying data from the Korea Integrated Logistics Association, updated April 2026); Korea's national statistics authority, 2025 December and Annual Online Shopping Trends (February 2, 2026).
These figures describe the scale of logistics and online commerce. They do not measure the frequency of missing inventory or establish liability among logistics providers.
Nevertheless, inventory accuracy has practical consequences.
If a company's records show goods that are not physically available, orders may be accepted even though the warehouse cannot fulfill them.
If physical stock exists but the system does not recognize it, saleable goods may remain unavailable to customers.
As outsourced operations grow, consistent SKU codes, units of measurement, and transaction timestamps become increasingly useful.
What If You Sent 1,000 Units but the Warehouse Confirmed Only 960?
Inventory discrepancies do not always begin while goods are in storage.
Sometimes they begin on the day the warehouse receives the shipment.
Suppose a cosmetics manufacturer dispatches 1,000 units to a fulfillment center.
Its dispatch statement also records 1,000 units.
However, the fulfillment center confirms receiving only 960 units.
The manufacturer says 1,000 units were sent.
The warehouse says 960 units were accepted.
Those statements describe different stages of the transaction.
The manufacturer's dispatch statement records the goods that were released for delivery.
The warehouse's receiving confirmation records the quantity accepted under the agreed receiving and inspection procedure.
Receiving ten cartons does not necessarily mean that the warehouse has individually counted every product inside them.
The contractual inspection standard matters.
Did the warehouse agree to inspect only the outer packaging and number of cartons?
Or did it agree to open the cartons and verify individual quantities, SKUs, and visible damage?
The records needed to resolve the discrepancy depend on that distinction.
A logistics agreement can therefore distinguish four quantities:
- Expected inbound quantity: the quantity scheduled for delivery
- Arrived quantity: the quantity recorded as having arrived at the warehouse
- Inspected quantity: the quantity checked under the agreed inspection method
- Confirmed received quantity: the quantity the warehouse formally accepted
If a discrepancy is identified during receiving, the parties should know who records it, what evidence is retained, and when the other party is informed.
Without a clear receiving confirmation, it may be difficult to determine whether a shortage discovered months later began at delivery or during storage.
Preserve the Original Records Before Adjusting Inventory
When the numbers do not match, the immediate temptation is to correct the inventory balance.
But changing the figures before identifying the cause may make the original discrepancy harder to investigate.
First, identify the date and time when the difference was discovered.
If the company's ERP report was downloaded at 9:00 a.m. and the warehouse's WMS report at 5:00 p.m., shipments processed between those times could explain part of the difference.
Preserve the original reports before making adjustments.
Next, identify the last point at which the two inventory balances agreed.
Starting from that balance, add confirmed receipts, subtract authorized dispatches, and account for inspected returns and approved inventory adjustments.
The resulting calculation helps identify which transactions require closer examination.
Each Logistics Document Answers a Different Question
A manufacturer's dispatch statement shows what the sender recorded as shipped.
A warehouse receiving confirmation shows what the receiving warehouse accepted.
A shipping instruction identifies what the customer or authorized party requested to be dispatched.
Picking and dispatch confirmation records show what the warehouse processed.
Carrier handover documents help establish whether goods were transferred to the next stage of delivery.
Return shipping records show that a return was initiated or transported.
A warehouse return-inspection report shows what was physically received and inspected.
Finally, a stocktake report and inventory adjustment history help explain differences between the recorded balance and physical stock.
If an adjustment was made, the records should show who made it, why it was necessary, when it occurred, and how the balance changed.
With records using the same cutoff time, SKU, and unit of measurement, the parties can ask a much more precise question:
After the last confirmed inventory balance, which receiving, dispatch, return, or adjustment transactions changed the quantity, and where are those transactions recorded?
That is more productive than repeatedly arguing that one side's inventory system must be correct.
How Should a Logistics Contract Address Inventory Discrepancies?
Now consider the contract itself.
Does it explain when the warehouse confirms receiving goods?
Does it identify who may authorize dispatch?
If the stock count does not match the recorded balance, does it specify which records the parties should compare?
Consider the following illustrative provision.
Before: A General Consultation Clause
The service provider shall store the entrusted goods with due care. Any inventory discrepancy shall be resolved through mutual consultation between the parties.
The provision refers to cooperation, but it leaves several practical questions unanswered.
When is the received quantity confirmed?
Who approves the release of goods?
What evidence must be retained for returns and inventory adjustments?
Which stock balance and cutoff time will the parties use when investigating a discrepancy?
Without answers, even a cooperative discussion may become difficult.
After: A More Specific Recordkeeping Clause
The service provider shall separately record the expected inbound quantity, physically inspected quantity, and confirmed received quantity by SKU and unit of measurement. Dispatches shall be processed through the authorization procedure agreed upon by the parties. Records shall identify the reason, processing time, and responsible person for order cancellations, returns, movements of defective goods, and inventory adjustments. Where an inventory discrepancy is identified, the parties shall compare receiving, dispatch, return, and adjustment records against the physical stocktake using the same cutoff time. Where loss or damage is established, liability and the amount of compensation shall be determined under the applicable law and the terms of this agreement.
This is an illustrative drafting approach, not an official standard contractual clause.
Actual wording should reflect the services performed, goods involved, inspection method, information systems, and agreed responsibilities.
The purpose is to make an investigation possible.
When the stock numbers differ, both parties should be able to identify which records must be produced and compared.
If actual loss or damage is established, the contractual liability provisions and applicable law then become relevant.
A useful contract does more than say the parties will negotiate. It tells them what evidence the negotiation should begin with.
Is a Warehousekeeper Responsible When Stored Goods Are Actually Lost?
Once the records establish that stored goods cannot be returned, the next question concerns legal responsibility.
Article 155 of the Korean Commercial Act (상법) defines a commercial warehousekeeper as a person engaged in the business of storing goods in a warehouse for others.
Article 160 addresses liability for loss of or damage to deposited goods.
Under that provision, a warehousekeeper cannot avoid liability for such loss or damage unless it proves that neither the warehousekeeper nor its employees neglected the care required in storing the goods.
The term "deposited goods" refers to goods entrusted for storage.
Where the legal relationship falls within the statutory rules governing commercial warehousing, the warehousekeeper's ability to establish that the necessary care was exercised becomes important once loss or damage has been established.
However, Article 160 does not mean that every difference between an ERP balance, WMS balance, and physical count automatically creates a compensation claim.
The underlying facts must first be identified.
Which goods were entrusted?
How many units did the warehouse accept?
Which goods were properly dispatched?
What quantity can no longer be returned?
Other provisions of the Commercial Act also concern the handling of stored goods.
Under Article 156, a warehousekeeper must issue a warehouse receipt upon the depositor's request, containing prescribed details such as the type, quality, quantity, and storage location of the goods.
Article 161 provides for inspection of deposited goods during business hours by the depositor or holder of the warehouse receipt.
Source: Korean Commercial Act, Articles 155, 156, 160 and 161.
These provisions help explain why confirmed quantities, storage records, and the ability to inspect goods matter in a commercial warehousing relationship.
The Supreme Court Has Also Addressed Unauthorized Release of Stored Goods
When people hear that stored goods have been lost, they often think first of theft or physical disappearance.
But another problem can arise when a warehouse releases goods to an unauthorized party and can no longer return them to the person entitled to receive them.
The Supreme Court of Korea addressed such an issue in Decision 80Da1609, delivered on December 22, 1981.
The case did not concern modern e-commerce fulfillment.
It involved raw silk held in storage in connection with a secured commercial transaction.
Storage documentation had been issued, and the release of the goods was subject to specified consent or instructions.
Nevertheless, the goods were released to another company without the required consent or return of the relevant storage document.
The Supreme Court interpreted "loss" under Article 166 of the Commercial Act to include not only the physical disappearance of goods but also their unauthorized release where they could no longer be returned to the person entitled to them.
The case also involved a finding of bad faith on the part of the custodian's employee, which was relevant to the rejection of the short limitation-period defense.
Source: Supreme Court of Korea, Decision 80Da1609 (December 22, 1981).
The contractual arrangement was different from today's fulfillment services, but the judgment illustrates why dispatch authority deserves attention.
A business should be able to identify who may request the release of goods, what constitutes an authorized instruction, and how the warehouse records the actual release.
Suppose a seller cancels an order, but the warehouse continues processing the shipment.
The timing of three events may become relevant:
- when the seller cancelled the order
- when the warehouse confirmed dispatch
- when the parcel was handed to the carrier
Comparing those records can help establish the stage at which the instructions and the physical movement of the goods diverged.
Storage, Picking, and Delivery May Involve Different Responsibilities
A fulfillment agreement may combine several services under a general description such as "storage and delivery operations."
The provider may receive stock, manage inventory, pick and pack orders, hand parcels over to a carrier, and inspect returns.
An incident occurring during storage is not necessarily the same as an incident occurring during transportation.
If goods can no longer be located on a warehouse shelf, receiving, internal movement, and stocktake records become particularly relevant.
If goods have been picked and packed but have not yet been handed to the carrier, picking, packing, and dispatch confirmation records may be central.
If the goods disappear after carrier handover, proof of transfer and transportation records may also be needed.
In Supreme Court Decision 2019Da213009, delivered on July 10, 2019, the Court examined an integrated logistics operation contract that included storage, logistics information services, port handling, and other functions.
The Court characterized the central element of the particular contractual arrangement as multimodal transportation when determining the applicable legal framework for cargo damage.
Source: Supreme Court of Korea, Decision 2019Da213009 (July 10, 2019).
This does not mean every 3PL or fulfillment contract is legally a transportation contract.
Rather, the scope and essential characteristics of the particular agreement matter.
A contract described broadly as a "logistics services agreement" may involve different duties at different stages.
That is why the handover points and supporting records should be clearly documented.
Physical Quantity and Saleable Inventory Are Not Always the Same
Even when the overall number of products matches, the quantity available for sale may be different.
Suppose an online store shows 100 black T-shirts in inventory.
The warehouse records 70 units in size M and 30 units in size L.
The total is 100 units in both systems.
But if customers order 80 units in size M, the warehouse cannot fulfill the entire order from the available size M stock.
A similar problem can arise with cosmetics or food products that require management by manufacturing batch, production number, or expiration date.
The total physical count may be correct, but some products may be damaged or held from sale.
The unit of measurement also matters.
One carton containing ten individual products is not the same as one individual unit.
These differences should not automatically be described as lost goods.
If the problem concerns incorrect SKU classifications or units of measurement, those inventory records need to be reconciled.
If goods were genuinely lost while in storage, the return and liability questions can then be considered.
A logistics agreement can help by defining when inventory is classified as saleable stock, stock awaiting dispatch, returns pending inspection, or damaged and restricted stock.
Clear classification rules make the records easier to reconcile.
If 100 Products Are Lost, Can You Claim Their Full Retail Price?
After establishing that goods were actually lost or damaged, the amount of compensation becomes a separate question.
Suppose 100 products can no longer be returned.
That does not automatically mean that the seller can recover the full retail price of all 100 products.
It also does not mean that compensation must always be limited to the original purchase cost.
Article 393(1) of the Korean Civil Act (민법) limits damages for non-performance of an obligation to ordinary damages.
Article 393(2) addresses damages arising from special circumstances, for which liability depends on whether the obligor knew or could have known of those circumstances.
For example, a seller may argue that missing products prevented it from fulfilling a transaction associated with a scheduled sales event.
The actual purchase orders, contractual terms, relationship between the incident and the alleged loss, and any special circumstances would need to be examined.
A discrepancy in inventory records does not, by itself, establish that all anticipated sales revenue is recoverable.
The logistics agreement may also contain provisions on the valuation of goods, compensation limits, exclusions, or limitations of liability.
Insurance coverage may be relevant as well.
However, the existence of an insurance policy does not necessarily establish that the particular loss is covered.
Source: Korean Civil Act, Articles 390 and 393.
The calculation of damages should therefore be distinguished from the earlier task of establishing how many goods were actually lost.
Can an Inventory Discrepancy Be Left Until the Next Settlement?
When an inventory difference appears, the parties may decide to revisit it during their next monthly reconciliation.
That may be convenient, but it can also make the facts harder to reconstruct.
Additional shipments, returns, and inventory adjustments accumulate.
Employees may change roles.
Original logs may become more difficult to locate.
There may also be legal time limits.
Article 166(1) of the Korean Commercial Act provides a one-year limitation period, in principle measured from the date of release of the goods, for a warehousekeeper's liability concerning loss of or damage to deposited goods.
For total loss, Article 166(2) addresses the starting point based on dispatch of the relevant notice.
Article 166(3) excludes application of the preceding provisions where the warehousekeeper or its employee acted in bad faith.
Source: Korean Commercial Act, Article 166; Supreme Court of Korea, Decision 80Da1609 (December 22, 1981).
This does not mean that every logistics inventory claim expires one year after the business discovers a shortage.
The applicable limitation period depends on the nature of the contractual relationship, the claim, the relevant starting point, and any applicable exceptions.
Different legal provisions may become relevant where the essential service is transportation rather than commercial warehousing.
Questions concerning limitation periods, damages claims, and formal disputes may require review by an attorney-at-law.
For the business, the immediate practical step is to preserve the original stock records, including the date the discrepancy was discovered and the receiving, dispatch, return, and stocktake records available at that time.
What Can a Business Check Itself?
A business can begin by downloading inventory reports from its ERP and the logistics provider's WMS using the same cutoff time.
The SKU, product options, and units of measurement should be aligned.
Next, identify the last point when the two balances agreed.
From that point, review receiving confirmations, dispatches, returns, and inventory adjustments in chronological order.
Physical stocktake reports should also identify which storage areas were counted and whether saleable, damaged, and restricted stock were included.
These steps may reveal recording differences that can be explained without immediately treating the discrepancy as a confirmed loss.
However, additional contractual analysis may be needed when receiving quantities are not clearly confirmed, dispatch instructions and approvals differ, or the agreement does not establish inspection and stocktaking procedures.
Where the provider handles both warehousing and transportation, the parties may also need to document who took custody of the goods at each stage.
Under Article 2(1)2 of the Korean Administrative Attorney Act (행정사법) and the relevant provision of its Enforcement Decree, an Administrative Attorney may prepare documents concerning rights, obligations, and commercial transactions, including contracts and agreements, except where another law restricts the work.
Within that statutory scope, an Administrative Attorney may help document terms agreed by the parties concerning receiving confirmation, dispatch authorization, inventory counts and adjustments, and the retention and exchange of transaction records.
This document-preparation work is distinct from physical warehouse auditing, technical loss assessments, legal representation in damages negotiations, or litigation.
Those matters may require appropriately qualified specialists or an attorney-at-law, depending on the issue.
When the Numbers Differ, Where Should You Look First?
Return to the original example.
The company's inventory records show 1,200 units.
The warehouse management system shows 1,150.
A physical count shows 1,130.
At first glance, it appears that 70 units have disappeared.
But we now know why that conclusion would be premature.
The first 50-unit difference should be examined through receiving, dispatch, return, and adjustment records.
The remaining 20-unit difference should be examined through warehouse movement records, dispatch records, and the physical stocktake.
A return may have been recorded late.
The two systems may have used different inventory units.
Products may have been transferred to a restricted storage area.
Or goods may actually have been released incorrectly or become impossible to return.
Once the relevant facts are established, the parties can examine their storage and dispatch obligations and the applicable liability rules.
A logistics agreement can make this process easier by defining not only compensation provisions but also the quantity accepted at receiving, who is authorized to release goods, and which records must be used when inventory counts differ.
Common Questions
Q. If the company's inventory balance differs from the warehouse's physical stock, must the logistics provider compensate for the difference?
A. Not automatically. The parties should first reconcile receiving, shipping, return, inventory adjustment, and stocktake records to identify the cause, then assess whether loss or damage occurred and which contractual and statutory liability rules apply.
Q. What should be checked when a manufacturer dispatched more goods than the warehouse confirmed receiving?
A. Compare the manufacturer's dispatch statement with the warehouse's expected receiving quantity, inspection records, and confirmed received quantity. The agreed inspection method, including whether cartons or individual products were counted, matters.
Q. Is a contract clause stating that inventory discrepancies will be resolved by mutual consultation sufficient?
A. Such a clause may leave the reconciliation process unclear. The agreement can specify receiving confirmation, dispatch authorization, returns, inventory adjustments, the cutoff time used for comparison, and the records each party must retain.
This article is intended to provide general information. The legal characterization of a logistics contract, liability for loss or damage, and compensation depend on the actual facts and applicable law.
For an initial free review, you may provide your logistics outsourcing agreement, receiving, dispatch, return and inventory adjustment records, and latest physical stocktake so that the records requiring comparison and any missing contractual terms on receiving confirmation, dispatch authorization, and stocktaking can be identified.
Three-point summary
A discrepancy between company records and physical warehouse stock does not automatically establish that all missing units were lost or that the warehouse provider is liable.
Compare receiving confirmations, authorized shipments, returns, inventory adjustments, and physical stocktakes using the same cutoff time, SKU, and unit of measurement.
Where actual loss or damage is established, assess the contractual structure, whether commercial warehousing rules apply, and the relevant liability and limitation-period provisions.