Shrinkage
Definition
Inventory that disappears through theft, damage, miscounts, receiving errors or unrecorded losses, so physical stock is lower than the records say.
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Formula
Shrinkage % = (Recorded Inventory − Counted Inventory) ÷ Recorded Inventory × 100Some shrinkage is normal, but it should be measured and expensed, not buried. On Amazon, lost and damaged FBA units can often be reimbursed if you catch them.
Track shrinkage by location and cause. Watch for: shrinkage that rises after a warehouse move or new 3PL, which often points to receiving errors.
Example
Records show $250,000 of inventory, but the count finds $243,750, a $6,250 shortfall or 2.5% shrinkage.