{"id":29488,"date":"2025-02-19T08:00:43","date_gmt":"2025-02-19T06:00:43","guid":{"rendered":"https:\/\/rackbeat.com\/?post_type=glossaries&#038;p=29488"},"modified":"2025-02-19T12:32:41","modified_gmt":"2025-02-19T10:32:41","slug":"shrinkage","status":"publish","type":"glossaries","link":"https:\/\/rackbeat.com\/en\/glossaries\/shrinkage\/","title":{"rendered":"Shrinkage"},"content":{"rendered":"<h2 data-start=\"415\" data-end=\"447\"><strong data-start=\"419\" data-end=\"445\">What Causes Shrinkage?<\/strong><\/h2>\n<p data-start=\"448\" data-end=\"513\">Shrinkage can have multiple causes, with the most common being:<\/p>\n<ul>\n<li data-start=\"515\" data-end=\"701\"><strong>Theft <\/strong>\u2013 Internal or external theft is one of the biggest sources of shrinkage. Employees may take items without recording them, or external parties may steal from the warehouse.<\/li>\n<li data-start=\"703\" data-end=\"872\"><strong>Misregistration <\/strong>\u2013 Without an <a href=\"https:\/\/rackbeat.com\/en\/\">inventory management<\/a> system, errors can occur during <a href=\"https:\/\/rackbeat.com\/en\/product_features\/the-registration-of-goods\/\">goods reception<\/a>, picking or shipping, leading to discrepancies in stock levels.<\/li>\n<li data-start=\"874\" data-end=\"1045\"><strong>Damaged goods <\/strong>\u2013 If items break during transport or storage without being recorded as discarded, the discrepancy between actual and registered inventory increases.<\/li>\n<li data-start=\"1047\" data-end=\"1159\"><strong>Supplier fraud<\/strong> \u2013 If a supplier delivers fewer goods than invoiced, it creates shrinkage in your system.<\/li>\n<li data-start=\"1047\" data-end=\"1159\"><strong>Expiration or obsolescence <\/strong>\u2013 Products that become outdated or expire often need to be discarded, which also counts as shrinkage.<\/li>\n<\/ul>\n<h2 data-start=\"1305\" data-end=\"1341\"><strong data-start=\"1309\" data-end=\"1339\">How to Minimize Shrinkage?<\/strong><\/h2>\n<p data-start=\"1342\" data-end=\"1483\">Reducing shrinkage requires effective<a href=\"https:\/\/rackbeat.com\/en\/\"> inventory management systems <\/a>and well-structured processes. Here are some of the best strategies:<\/p>\n<ul>\n<li data-start=\"1485\" data-end=\"1645\">Use a <a href=\"https:\/\/rackbeat.com\/en\/\">WMS<\/a> (Warehouse Management System) \u2013 A digital inventory management system provides <a href=\"https:\/\/rackbeat.com\/en\/product_features\/real-time-updates-on-your-inventory\/\">real-time stock insights<\/a> and reduces misregistration risks.<\/li>\n<li data-start=\"1647\" data-end=\"1853\">Conduct regular stock counts \u2013 Performing <a href=\"https:\/\/rackbeat.com\/en\/product_features\/inventory-counting\/\">inventory counts <\/a>helps detect shrinkage early. With Rackbeat, you can easily conduct and log stock counts to stay on top of inventory discrepancies.<\/li>\n<li data-start=\"1855\" data-end=\"2047\">Scan items using a mobile app \u2013 By <a href=\"https:\/\/rackbeat.com\/en\/mobile-user\/\">scanning products with a mobile warehouse app<\/a> or <a href=\"https:\/\/rackbeat.com\/en\/hardware\/\">barcode scanner<\/a>, you ensure all item movements are recorded correctly, reducing shrinkage risks.<\/li>\n<li data-start=\"2049\" data-end=\"2186\">Streamline order management \u2013 Accurate <a href=\"https:\/\/rackbeat.com\/en\/order-management\/\">order management <\/a>prevents confusion in stock movements, reducing errors and shrinkage.<\/li>\n<li data-start=\"2188\" data-end=\"2376\">Organized <a href=\"https:\/\/rackbeat.com\/en\/inventory-management\/\">inventory management <\/a>\u2013 A well-structured warehouse and clear procedures for receiving, picking, and shipping make it easier to keep track of stock and minimize shrinkage.<\/li>\n<li data-start=\"2378\" data-end=\"2498\">Increase security \u2013 Surveillance, restricted access, and clear responsibilities help reduce theft and shrinkage.<\/li>\n<\/ul>\n<h3 data-start=\"2505\" data-end=\"2542\"><\/h3>\n<h2 data-start=\"2505\" data-end=\"2542\"><strong data-start=\"2509\" data-end=\"2540\">How to Calculate Shrinkage?<\/strong><\/h2>\n<p data-start=\"2543\" data-end=\"2602\">Shrinkage can be calculated using the following formulas:<\/p>\n<p data-start=\"2604\" data-end=\"2634\"><strong data-start=\"2609\" data-end=\"2632\">Shrinkage in units<\/strong><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rackbeat.com\/wp-content\/ql-cache\/quicklatex.com-1afcb3b005e33c149bc10db3bd4a0f7e_l3.png\" class=\"ql-img-inline-formula quicklatex-auto-format\" alt=\"&#92;&#91;&#32;&#92;&#116;&#101;&#120;&#116;&#123;&#83;&#104;&#114;&#105;&#110;&#107;&#97;&#103;&#101;&#125;&#32;&#61;&#32;&#92;&#116;&#101;&#120;&#116;&#123;&#69;&#120;&#112;&#101;&#99;&#116;&#101;&#100;&#32;&#105;&#110;&#118;&#101;&#110;&#116;&#111;&#114;&#121;&#125;&#32;&#45;&#32;&#92;&#116;&#101;&#120;&#116;&#123;&#65;&#99;&#116;&#117;&#97;&#108;&#32;&#105;&#110;&#118;&#101;&#110;&#116;&#111;&#114;&#121;&#125;&#32;&#92;\" title=\"Rendered by QuickLaTeX.com\" height=\"17\" width=\"401\" style=\"vertical-align: 0px;\"\/><\/p>\n<p>&nbsp;<\/p>\n<p data-start=\"2744\" data-end=\"2792\"><strong data-start=\"2749\" data-end=\"2790\">Shrinkage as a percentage of revenue<\/strong><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rackbeat.com\/wp-content\/ql-cache\/quicklatex.com-fe9c61d806e34aa583dbc4ff45d4f3ee_l3.png\" class=\"ql-img-inline-formula quicklatex-auto-format\" alt=\"&#92;&#91;&#32;&#92;&#116;&#101;&#120;&#116;&#123;&#83;&#104;&#114;&#105;&#110;&#107;&#97;&#103;&#101;&#32;&#112;&#101;&#114;&#99;&#101;&#110;&#116;&#97;&#103;&#101;&#125;&#32;&#61;&#32;&#92;&#102;&#114;&#97;&#99;&#123;&#92;&#116;&#101;&#120;&#116;&#123;&#83;&#104;&#114;&#105;&#110;&#107;&#97;&#103;&#101;&#32;&#118;&#97;&#108;&#117;&#101;&#125;&#125;&#123;&#92;&#116;&#101;&#120;&#116;&#123;&#82;&#101;&#118;&#101;&#110;&#117;&#101;&#125;&#125;&#32;&#92;&#116;&#105;&#109;&#101;&#115;&#32;&#49;&#48;&#48;&#32;&#92;\" title=\"Rendered by QuickLaTeX.com\" height=\"36\" width=\"362\" style=\"vertical-align: 0px;\"\/><\/p>\n<p>&nbsp;<\/p>\n<p data-start=\"2918\" data-end=\"2974\"><strong data-start=\"2923\" data-end=\"2972\">Shrinkage as a percentage of inventory value<\/strong><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rackbeat.com\/wp-content\/ql-cache\/quicklatex.com-b8b8bdc2af34678402bb6ebea7ae7529_l3.png\" class=\"ql-img-inline-formula quicklatex-auto-format\" alt=\"&#92;&#91;&#32;&#92;&#116;&#101;&#120;&#116;&#123;&#83;&#104;&#114;&#105;&#110;&#107;&#97;&#103;&#101;&#32;&#112;&#101;&#114;&#99;&#101;&#110;&#116;&#97;&#103;&#101;&#125;&#32;&#61;&#32;&#92;&#102;&#114;&#97;&#99;&#123;&#92;&#116;&#101;&#120;&#116;&#123;&#83;&#104;&#114;&#105;&#110;&#107;&#97;&#103;&#101;&#32;&#118;&#97;&#108;&#117;&#101;&#125;&#125;&#123;&#92;&#116;&#101;&#120;&#116;&#123;&#69;&#120;&#112;&#101;&#99;&#116;&#101;&#100;&#32;&#105;&#110;&#118;&#101;&#110;&#116;&#111;&#114;&#121;&#32;&#118;&#97;&#108;&#117;&#101;&#125;&#125;&#32;&#92;&#116;&#105;&#109;&#101;&#115;&#32;&#49;&#48;&#48;&#32;&#92;\" title=\"Rendered by QuickLaTeX.com\" height=\"40\" width=\"436\" style=\"vertical-align: 0px;\"\/><\/p>\n<p>&nbsp;<\/p>\n<h2 data-start=\"3122\" data-end=\"3161\"><strong data-start=\"3126\" data-end=\"3159\">Example Shrinkage Calculation<\/strong><\/h2>\n<p data-start=\"3163\" data-end=\"3271\">A company expects to have 1,000 units of a product in stock, but after counting, only 950 units are found.<\/p>\n<p data-start=\"3273\" data-end=\"3303\"><strong data-start=\"3278\" data-end=\"3301\">Shrinkage in units<\/strong><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rackbeat.com\/wp-content\/ql-cache\/quicklatex.com-aeda42186411966e60407a5ea12abc04_l3.png\" class=\"ql-img-inline-formula quicklatex-auto-format\" alt=\"&#92;&#91;&#32;&#49;&#44;&#48;&#48;&#48;&#32;&#45;&#32;&#57;&#53;&#48;&#32;&#61;&#32;&#53;&#48;&#32;&#92;&#116;&#101;&#120;&#116;&#123;&#32;&#117;&#110;&#105;&#116;&#115;&#125;&#32;&#92;\" title=\"Rendered by QuickLaTeX.com\" height=\"17\" width=\"177\" style=\"vertical-align: 0px;\"\/><\/p>\n<p>&nbsp;<\/p>\n<p><strong>If each unit costs 100 currency units, the shrinkage value is:<\/strong><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rackbeat.com\/wp-content\/ql-cache\/quicklatex.com-31664b45a976918ce67e6456175cc9a9_l3.png\" class=\"ql-img-inline-formula quicklatex-auto-format\" alt=\"&#92;&#91;&#32;&#53;&#48;&#32;&#92;&#116;&#105;&#109;&#101;&#115;&#32;&#49;&#48;&#48;&#32;&#61;&#32;&#53;&#44;&#48;&#48;&#48;&#32;&#92;&#116;&#101;&#120;&#116;&#123;&#32;&#99;&#117;&#114;&#114;&#101;&#110;&#99;&#121;&#32;&#117;&#110;&#105;&#116;&#115;&#125;&#32;&#92;\" title=\"Rendered by QuickLaTeX.com\" height=\"17\" width=\"250\" style=\"vertical-align: 0px;\"\/><\/p>\n<p>&nbsp;<\/p>\n<p data-start=\"3521\" data-end=\"3624\"><strong>If the company\u2019s annual revenue is 500,000 currency units, the shrinkage percentage is calculated as:<\/strong><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/rackbeat.com\/wp-content\/ql-cache\/quicklatex.com-c46353870a4b5f0be6ebac0d7899bb78_l3.png\" class=\"ql-img-inline-formula quicklatex-auto-format\" alt=\"&#92;&#91;&#32;&#92;&#102;&#114;&#97;&#99;&#123;&#53;&#44;&#48;&#48;&#48;&#125;&#123;&#53;&#48;&#48;&#44;&#48;&#48;&#48;&#125;&#32;&#92;&#116;&#105;&#109;&#101;&#115;&#32;&#49;&#48;&#48;&#32;&#61;&#32;&#49;&#92;&#37;&#32;&#92;\" title=\"Rendered by QuickLaTeX.com\" height=\"41\" width=\"157\" style=\"vertical-align: 0px;\"\/><\/p>\n<p>&nbsp;<\/p>\n<h2 data-start=\"3707\" data-end=\"3739\"><strong data-start=\"3711\" data-end=\"3737\">Shrinkage and Rackbeat<\/strong><\/h2>\n<p data-start=\"3740\" data-end=\"4004\">With <strong data-start=\"3745\" data-end=\"3761\">Rackbeat WMS<\/strong>, you can easily monitor your inventory levels and minimize shrinkage. By <strong data-start=\"3835\" data-end=\"3873\">scanning items with our mobile app<\/strong>, you ensure accurate tracking of stock movements, while <strong data-start=\"3930\" data-end=\"3955\">easy inventory counts<\/strong> help detect and resolve discrepancies quickly.<\/p>\n<p data-start=\"4006\" data-end=\"4274\"><strong data-start=\"4006\" data-end=\"4040\">Effective inventory management<\/strong> is the key to reducing shrinkage and running a profitable business. <strong data-start=\"4109\" data-end=\"4151\">Rackbeat\u2019s inventory management system<\/strong> gives you full control over your stock and helps you optimize your <strong data-start=\"4219\" data-end=\"4239\">order management<\/strong>\u2014all to protect your bottom line.<\/p>\n<p data-start=\"4276\" data-end=\"4363\"><strong data-start=\"4279\" data-end=\"4325\">Want to reduce shrinkage in your business?<\/strong> \ud83d\ude80 <strong data-start=\"4329\" data-end=\"4361\">Try Rackbeat for free today!<\/strong><\/p>\n<p><!--HubSpot Call-to-Action Code --><span id=\"hs-cta-wrapper-6f4872eb-8d57-4a91-b02b-925a4017ee4d\" class=\"hs-cta-wrapper\"><span id=\"hs-cta-6f4872eb-8d57-4a91-b02b-925a4017ee4d\" class=\"hs-cta-node hs-cta-6f4872eb-8d57-4a91-b02b-925a4017ee4d\"><!-- [if lte IE 8]>\n\n\n<div id=\"hs-cta-ie-element\"><\/div>\n\n\n<![endif]--><a href=\"https:\/\/cta-redirect.hubspot.com\/cta\/redirect\/20251362\/6f4872eb-8d57-4a91-b02b-925a4017ee4d\"><img decoding=\"async\" id=\"hs-cta-img-6f4872eb-8d57-4a91-b02b-925a4017ee4d\" class=\"hs-cta-img\" style=\"border-width: 0px;\" src=\"https:\/\/no-cache.hubspot.com\/cta\/default\/20251362\/6f4872eb-8d57-4a91-b02b-925a4017ee4d.png\" alt=\"FREE TRIAL\" \/><\/a><\/span><script charset=\"utf-8\" src=\"https:\/\/js.hscta.net\/cta\/current.js\"><\/script><script type=\"text\/javascript\"> hbspt.cta.load(20251362, '6f4872eb-8d57-4a91-b02b-925a4017ee4d', {\"useNewLoader\":\"true\",\"region\":\"na1\"}); <\/script><\/span><!-- end HubSpot Call-to-Action Code --><\/p>\n","protected":false},"featured_media":0,"template":"","meta":{"content-type":"","inline_featured_image":false},"glossaries-cat":[349],"class_list":["post-29488","glossaries","type-glossaries","status-publish","hentry","glossaries-cat-s-en"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v20.0 (Yoast SEO v25.9) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What is Shrinkage? | Rackbeat Glossary<\/title>\n<meta name=\"description\" content=\"Shrinkage can hurt your bottom line, but with effective inventory management, WMS, and precise order management, it can be minimized. 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