What is Shrinkage?
Shrinkage is stock that is lost without being sold, through theft, damage, spoilage, counting mistakes or supplier short deliveries.
Updated
Meaning
English
Shrinkage is stock that is lost without being sold, through theft, damage, spoilage, counting mistakes or supplier short deliveries.
Roman Urdu
Shrinkage woh maal hai jo bike baghair ghayab ho jata hai: chori, tootna, kharab hona, ginti ki ghalti ya supplier ka kam maal dena.
Also called stock loss, inventory shrink, pilferage.
Example
A supermarket's books show 2.4 million rupees of stock at cost, but the quarterly count finds 2.33 million. Shrinkage is 70,000 rupees, about 3% of stock, mostly in small high-value items near the exit.
How it works
Shrinkage is usually measured as a percentage of sales or stock value over a period. Its causes split into four groups: customer theft, staff theft, admin errors (wrong entries, wrong units, unrecorded returns) and supplier issues (short deliveries accepted without checking). In many shops the admin errors are as large as the theft.
Reducing it starts with measuring it: regular counts, damage recorded as it happens, deliveries checked against the purchase, and high-value items kept near the counter. Compare shrinkage by category and branch; a sudden rise in one place points to the cause.
In Nafaa
Every stock count in Nafaa books the difference and shows what was gained and lost in value. Damage and wastage are reported separately with manager approval, and the stock movements page shows every change to a product's stock with who made it.
Related terms
- Stock Take
A stock take is a physical count of the goods on the shelves and in the store, compared with what the system says should be there.
- Wastage
Wastage is stock that is damaged, spoilt, expired or used up without being sold, and must be written off.
- Cash Over and Short
Cash over and short is the difference between the cash counted in the drawer at closing and the cash the bills say should be there.
- Stock Adjustment
A stock adjustment is a manual correction to a product's stock quantity, with a reason, when the system figure does not match reality.