Report Summary: Mishandling and packaging deficiencies were the major causes of damage to dry groceries in a 1985 survey of warehousing operations by the Agricultural Marketing Service, U.S. Department of Agriculture. The 10 warehouses surveyed employed a variety of systems from conventional to fully automated. Recouping practices varied from almost nonexistent to extensive salvaging and repacking. Disposition of recouped merchandise ranged from selling at full price to donating the item to charity. Damage reduction efforts varied similarly from none to regularly scheduled employee meetings and incentive programs. Few firms are fully aware of actual costs of damage, i.e., the many indirect costs over and above the value of the product lost. Many means are available to reduce damage; not all of them are economically feasible or applicable for any given firm. Suppliers must be willing to cooperate with their customers in resolving obvious packaging problems.