Lesson 4 of 4

Shrinkage: where stock goes missing

Sometimes you count carefully and the shelf is still short. Often there is a simple explanation. Sometimes there is not. This lesson is about telling the two apart and what to do about each.

Reasons for a gap

When the shelf and the record disagree, the cause is usually one of these.

  • A sale that was not recorded yet.
  • Damaged or spoiled stock that was thrown away or put aside without being written down.
  • Expired stock that was removed without a record.
  • A supplier shortage that nobody noticed when the delivery arrived.
  • A recording mistake, such as a wrong quantity typed in or an item booked against the wrong product.
  • Stock taken without being paid for, by a customer or by someone who works there.

Some of these, such as stock taken without payment, are real losses of goods. The rest are mostly paperwork problems, and paperwork problems can be fixed.

What shrinkage is

Shrinkage is the gap that is still unexplained after you have looked for the reasons above. The record says the stock should be there. It is not, and nobody can say why. That unexplained part is what a business needs to watch closely.

From the gap to shrinkage A row of boxes. The gap between the record and your count, minus the reasons you can find, such as unrecorded sales or damage, leaves the unexplained gap, called shrinkage. Gap found record minus count − Reasons you find e.g. a missed sale or damage = Still unexplained shrinkage If nothing is left over, the gap is explained and the record can be corrected. If something is left over, tell your manager.
Shrinkage is the part of the gap that nobody can explain after the simple reasons have been checked.

What to do when you find a gap

  1. Recount the line. Make sure the count is right before you chase anything.
  2. Check for a simple reason. Ask whether an item was damaged, or a sale was missed, and not written down.
  3. Write it down. Record the counted number, the record number, the gap and a short note of what you checked.
  4. Tell your manager the same day. A gap reported straight away is much easier to trace than one found months later.

Do not change your count to match the system, and do not quietly adjust the record to make the gap disappear.

Example

Example numbers only. The record says 36 cartons of long-life milk. You count 32. You recount: still 32. One carton is split and was put aside without being written down, and one sale has not been entered. That explains 2 of the 4. The other 2 are unexplained, so you note them and tell your manager.

What the full course covers

This short course gave you the basics: why records and shelves must match, how to count and measure accuracy, how to set a re-order point, and what shrinkage is. Store Inventory Essentials, the full MK Global course for store attendants and stock handlers, goes deeper on:

  • Receiving goods from suppliers: checking the delivery note, inspecting for damage and what to write before you sign.
  • A fuller counting method, with a counting form and the counting errors to avoid.
  • Stock zones, minimum and maximum levels, and a sample reorder sheet.
  • Honesty and ethics in stock work, with real-life scenarios.
  • Common mistakes and working as a team on stock, followed by a final assessment.

See Store Inventory Essentials on our products page.

Key points
  • Most gaps have a simple reason. Shrinkage is what is left unexplained.
  • Recount, check for a simple reason, write it down, tell your manager the same day.
  • Never change a count or the record to hide a gap.