Shrinkage (accounting)

From Wikipedia, the free encyclopedia

This article or section does not adequately cite its references or sources.
Please help improve this article by adding citations to reliable sources. (help, get involved!)
Any material not supported by sources may be challenged and removed at any time. This article has been tagged since February 2007.

Items lost to shrink

In financial accounting the term inventory shrinkage (sometimes truncated to shrink) is the loss of products between point of manufacture or purchase from supplier and point of sale. Sometimes shrinkage may be as high as 15% to 20% of total volume,^{[citation needed]} having a major negative effect on profits. The average shrink percentage in the retail industry is about 2% of sales.^{[citation needed]}

Shrinkage is for a large part due to theft or some other crime,^{[citation needed]} and the prevention of this type of shrinkage is one reason for security guards and cameras. Also, some shrinkage is due to damage in transit, shipping errors, or misplaced goods. When dealing with perishable goods, such as produce, natural spoilage becomes a source of shrink.

The four major sources of inventory shrinkage in the retail industry are:

Employee theft
Shoplifting
Administrative errors (e.g. warehouse discrepancies)
Vendor fraud

In the United States, the National Retail Security Survey is published annually as part of the Security Research Project at the University of Florida. The Security Research Project endeavors to study various elements of workplace related crime and deviance with a special emphasis on the retail industry.