Shrinkage

Shrinkage takes place when the available or recorded stock is different from the physical stock because of theft, damage, recording errors, or administrative mistakes. In the context of recruitment, shrinkage also incorporates loss of productivity or revenue which can arise from turnover, absenteeism or inefficiencies in the hiring process. In this way, managing shrinkage is vitally necessary for a business to achieve profitability, operational efficiency and customer satisfaction.

Example of Shrinkage

For instance, imagine that a retail store suffers from shrinkage in its inventory at a very high rate. Despite recording a particular amount of products in stock, routine checks often show substantial deviances with items missing or damaged Upon investigating, it is evident that shoplifting, employee theft, and mismanagement of inventories cause the shrinkage. In order to solve the problem, the store applies different approaches. Among them are more effective security, better employee training, and daily inventory monitoring. Effective management of shrinkage is crucial to prevent losses, control inventory, and boost profit.