what is shrinkage in inventory

What is shrinkage in inventory refers to the loss of inventory due to various factors such as theft, damage, or errors in stock counting. Shrinkage is a common issue in retail and warehouse management, and it can significantly impact a company’s profitability if not addressed properly. Businesses typically calculate shrinkage as a percentage of total inventory or sales, and they implement measures like security systems, employee training, and inventory control practices to minimize losses. Identifying the causes of shrinkage is crucial to preventing further inventory discrepancies and improving the overall accuracy of inventory management.