What is considered known shrinkage?

Known shrinkage refers to losses in inventory that can be identified, quantified, and attributed to specific causes such as theft, errors, or other definable factors. The term encompasses any loss that has been processed and documented, allowing retailers to understand the reasons behind the shrinkage and take appropriate actions to mitigate it in the future.

When losses are identified and processed, like theft or administrative errors, they contribute to a clearer picture of inventory management and accountability. Retailers can analyze these losses to make informed decisions regarding security measures, staff training, and inventory control processes. This systematic approach enables them to address the root causes of shrinkage and implement corrective actions.

In contrast, missing stock without explanation, unquantified losses from audits, or expired items discarded do not provide the same level of clarity needed to define shrinkage as “known.” These areas may lead to inventory discrepancies, but they do not carry the same defined understanding or documentation as losses that have been tracked and categorized. This distinction is crucial for effectively managing and reducing shrinkage in a retail environment.