But then we can never close that transfer order from our understanding. The only way to close it is to receive it in full.

This is what we do. Amend fulfilment to match with quality received by other warehouse. Make inventory adjustment for quantity lost in transit.

I don't know if your receiving warehouse is the same way, but do they over receive? If so, same approach, fix with inventory adjustments?

we don't allow over receipts. we create a PO or TO for the balance and receive them that way into inventory