Inventory Shrinkage
The four major sources of inventory shrinkage
in the retail industry are: Employee theft, Shoplifting, Administrative
errors and Vendor fraud. 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, having
a major negative effect on profits.
The total shrink percentage
of the retail industry in the United States was 1.7% of sales in 2001
according to the University of Florida's, National Retail Security Survey.
48.5% of shrinkage is due
to employee theft and 31.7% due to shoplifting. The prevention of this
type of shrinkage is one reason for security guards, cameras and security
tags.
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.
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