What is inventory shrinkage?

Shrinkage is stock the records say you have and the shelf does not, from theft, damage, miscounts, receiving errors, or picking mistakes. It surfaces as a negative adjustment at count time, and the count only tells you the total — locating the cause requires tracking where in the flow it appeared.

Most shrinkage in a growing operation is clerical rather than criminal. Receiving against the purchase order instead of the physical pallet builds a discrepancy on day one that every later count inherits.

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