Inventory Shrinkage

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What is Inventory Shrinkage? Meaning.


Inventory Shrinkage is the difference between the booked inventory a company should have as a result of its sales, purchasing and manufacturing processes and the  actual inventory it has on hand. It is an unplanned and unwanted loss of inventory.


Major sources of shrinkage include:

  • Theft by employees (shoplifting) or customers.

  • Inventory counting errors.

  • Accounting errors.

  • Fraud.

  • Loss and damage.

  • Perishability, detoriation.


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