What is inventory shrinkage?<\/h2>\n\n\n\n![\"Graphic](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/Graphic-comparing-expected-vs-actual-inventory-to-show-shrinkage-impact-1024x576.webp\")
<\/figure>\n\n\n\n<\/p>\n\n\n\n
Le definition of inventory shrinkage<\/a> is when the stock on your records doesn\u2019t match what\u2019s actually on your shelves. <\/p>\n\n\n\nShrinkage can take many forms, including administrative mistakes, spoilage, vendor errors, or data mismatches. However, when you strip it all down, the most significant cause of shrinkage<\/a> remains theft. <\/p>\n\n\n\nShrinkage appears in various forms, including administrative errors, spoilage, vendor mistakes, or mismatched data. Warehouse supervisors often point to misplaced stock and delayed system updates as common causes of inventory variance.<\/p>\n\n\n\n
\u201cAccording to warehouse supervisors, misplaced stock and delayed system updates are the most common causes of inventory variance.\u201d<\/em><\/p>\n\n\n\nSometimes it\u2019s shoplifters. Often, it\u2019s employees. At other times, it\u2019s gaps in vendor deliveries or systems that don\u2019t flag problems quickly enough. No matter the label, shrinkage usually results from things slipping through the cracks or from people taking advantage when no one is watching. <\/p>\n\n\n\n
According to the 10-10-80 rule, 10% of people will never steal, 10% will always steal, and the remaining 80% might, if they think they can get away with it.<\/p>\n\n\n\n![\"ployee](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/ployee-theft-risk-model-showing-10-80-10-rule-for-inventory-shrinkage-causes-1024x1024.webp\")
<\/figure>\n\n\n\n<\/p>\n\n\n\n
It\u2019s that 80% that causes most of the shrinkage. Not out of malice, but because the opportunity was there and no one was watching.<\/p>\n\n\n\n
That\u2019s why absolute protection means more than just tracking stock. It means having systems that see<\/em> what\u2019s happening in real-time, so you can act before small losses turn into major ones.<\/p>\n\n\n\n<\/div>\n\n\n\nInventory shrinkage calculation:<\/h2>\n\n\n\n\n- Determine the recorded inventory<\/strong>.<\/li>\n\n\n\n
- Determine the actual inventory<\/strong>.<\/li>\n\n\n\n
- Calculate the difference between the recorded and actual inventory<\/strong>.<\/li>\n\n\n\n
- Calculate the shrinkage rate<\/strong>.<\/li>\n<\/ul>\n\n\n\n
<\/p>\n\n\n\n
Step #1: Determine recorded inventory:<\/strong> <\/h3>\n\n\n\n![\"Inventory](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/Inventory-tracking-spreadsheet-showing-stock-levels-and-reorder-details-1024x465.webp\")
Image fournie par projectmanager<\/a><\/figcaption><\/figure>\n\n\n\n<\/p>\n\n\n\n
Before you lift a single box or scan a single barcode, stop. You need to determine what your system indicates is in stock.<\/p>\n\n\n\n
Recorded inventory is the official, on-paper record of what you are supposed to have in stock. It’s the first step and is done before any physical inventory count or cycle count process begins.<\/p>\n\n\n\n
If you’re an inventory manager, your first step is to pull the latest inventory report from your system and freeze all stock movement during that snapshot to ensure accuracy. Meanwhile, the ERP Admin checks that the report reflects clean, reliable data, with no sync errors, outdated entries, or missing SKUs. This data typically comes from:<\/p>\n\n\n\n
\n- Inventory management systems (like NetSuite, SAP, TradeGecko, etc.)<\/li>\n\n\n\n
- Accounting software (like QuickBooks, Xero).<\/li>\n\n\n\n
- Physical ledgers or spreadsheets (in smaller operations).<\/li>\n<\/ul>\n\n\n\n
<\/p>\n\n\n\n
Step #2: Determine actual inventory:<\/strong><\/h3>\n\n\n\n![\"Employee](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/Employee-conducting-manual-inventory-count-using-clipboard-in-warehouse-aisle.webp\")
<\/figure>\n\n\n\n<\/p>\n\n\n\n
Actual inventory is the physical count of what\u2019s actually in your warehouse, stockroom, or storefront. <\/p>\n\n\n\n
This step comes in after you\u2019ve locked in your recorded numbers and paused operations. Most companies do this during off-hours, slow seasons, or at the end of the quarter.<\/p>\n\n\n\n
This is the step where everything gets exposed: what your system says you have and what\u2019s really on your shelves.<\/p>\n\n\n\n
You are about to find out the value of the inventory you have on hand after misplaced stock, shrinkage, scanning errors, and theft. Here’s how you can start counting.<\/p>\n\n\n\n
Break your space into zones. Assign teams:<\/strong><\/h4>\n\n\n\n![\"Warehouse](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/Warehouse-zoning-diagram-used-to-organize-stock-locations-and-reduce-inventory-miscounts-1024x399.webp\")
Image fournie par unicommerce<\/a><\/figcaption><\/figure>\n\n\n\n<\/p>\n\n\n\n
Walk through your storage areas and divide them into logical zones (e.g., Aisle 1, Shelf B, Stockroom Section C). Assign one team or person per zone with clear responsibility for that area.<\/p>\n\n\n\n
Use printed count sheets:<\/strong><\/h4>\n\n\n\n![\"Manual](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/Manual-stock-count-sheet-template-used-to-verify-inventory-levels-and-spot-shrinkage-2-1-979x1024.webp\")
<\/figure>\n\n\n\n<\/p>\n\n\n\n
You can use a printed count sheet, as shown above, or scan the item name and expected quantity columns using a mobile device, or upload it to a mobile inventory app or scanner tool (such as Sortly<\/a>, Zoho Inventory<\/a>, or even Google Sheets<\/a> on tablets).<\/p>\n\n\n\nPhysically count every single item:<\/strong><\/h4>\n\n\n\nHave your team manually count the physical items in each location or use a scanner. Touch it, see it, count it, and log it directly on the sheet or device.<\/p>\n\n\n\n
Freeze inventory movement during the count. No products in. No products out:<\/strong><\/h4>\n\n\n\nTemporarily pause order fulfillment, receiving, and transfers during the count. Post signs, notify the team, and restrict access as needed. Make it a non-negotiable.<\/p>\n\n\n\n
Double-check critical SKUs, especially those with high value or high turnover:<\/strong><\/h4>\n\n\n\nOnce the first count is complete, assign a supervisor or a second team to recount high-risk items. Compare both numbers. If there\u2019s a mismatch, investigate before finalizing the data.<\/p>\n\n\n\n
Step # 3: Calculate the difference:<\/strong> <\/h3>\n\n\n\n![\"Retail](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/Retail-shrinkage-formula-comparing-recorded-and-actual-inventory-values-1024x576.webp\")
<\/figure>\n\n\n\n<\/p>\n\n\n\n
Now, immediately after both recorded and actual inventory numbers are finalized, you subtract the actual inventory value from the recorded inventory value.<\/p>\n\n\n\n
You want to do this while everything is fresh, the data is locked, and movement is still paused. Inventory managers and finance teams often collaborate at this stage to reconcile discrepancies and identify the root cause of stock issues.<\/p>\n\n\n\n
Step #4: Calculate the shrinkage rate:<\/strong><\/h3>\n\n\n\nTo find your shrinkage rate, subtract the actual inventory from the recorded inventory.
Then divide that number by the recorded inventory and multiply by 100 to get the percentage.<\/p>\n\n\n\n
Shrinkage (%) = (Recorded Inventory \u2013 Actual Inventory) \u00f7 Recorded Inventory \u00d7 100<\/strong><\/p>\n\n\n\nFor example<\/p>\n\n\n\n
Let\u2019s say your recorded inventory<\/strong> shows $10,000<\/strong> worth of stock.
But when you count it, your actual inventory<\/strong> is only $9,200<\/strong>.<\/p>\n\n\n\nShrinkage = ($10,000 \u2013 $9,200) \u00f7 $10,000 \u00d7 100<\/strong>
<\/strong> = $800 \u00f7 $10,000 \u00d7 100 = 8%<\/strong><\/p>\n\n\n\nYour shrinkage rate is 8%<\/strong>, meaning that 8% of your stock is missing or unaccounted for.<\/p>\n\n\n\nAnd while 8% is high, even a small percentage matters, especially at scale.<\/p>\n\n\n\n![\"Illustration](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/Illustration-showing-search-for-lost-inventory-value-using-magnifying-glass.webp\")
<\/figure>\n\n\n\n<\/p>\n\n\n\n
<\/div>\n\n\n\nFrom inventory count to shrinkage control. How does tech powers inventory accuracy?<\/h2>\n\n\n\n
If you are ready to move from identifying the problem to reducing it, see our guide to shrinkage control best practices<\/a>.<\/p>\n\n\n\n\n- RFID<\/a> tags and handheld readers.<\/strong><\/li>\n\n\n\n
- Barcode scanners and mobile count apps<\/strong>.<\/li>\n\n\n\n
- Geofencing to manage zone-based audits<\/strong>.<\/li>\n\n\n\n
- BI tools like Power BI or Tableau<\/strong>.<\/li>\n\n\n\n
- AI to watch over counting areas.<\/strong><\/li>\n\n\n\n
- CCTV surveillance<\/a><\/strong>.<\/li>\n\n\n\n
- Surveillance vid\u00e9o \u00e0 distance<\/strong>.<\/li>\n<\/ul>\n\n\n\n
<\/p>\n\n\n\n
RFID tags and handheld readers:<\/strong><\/h3>\n\n\n\n![\"Handheld](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/Handheld-RFID-scanner-used-to-track-stock-and-prevent-inventory-shrinkage-in-real-time.webp\")
Image fournie par gaorfid<\/a><\/figcaption><\/figure>\n\n\n\n<\/p>\n\n\n\n
RFID (Radio Frequency Identification)<\/strong> tags are small chips with antennas that transmit product data when scanned by a reader. Handheld RFID readers<\/strong> are mobile devices that detect these tags using radio waves, even if the tags are out of sight or behind packaging.<\/p>\n\n\n\nUnlike barcodes, RFID doesn\u2019t need to be visible, allowing staff to scan dozens or even hundreds of items in seconds, even through boxes or on shelves. This means faster stock checks, easier audits, and a better chance of catching missing or misplaced items before they become a problem. By tagging products and scanning them as they move through the store or warehouse, teams can identify shrinkage early and take prompt action.<\/p>\n\n\n\n
How RFID tags and handheld readers help with shrinkage calculation:<\/strong><\/h4>\n\n\n\n
<\/figure>\n\n\n\n<\/p>\n\n\n\n
Le definition of inventory shrinkage<\/a> is when the stock on your records doesn\u2019t match what\u2019s actually on your shelves. <\/p>\n\n\n\n Shrinkage can take many forms, including administrative mistakes, spoilage, vendor errors, or data mismatches. However, when you strip it all down, the most significant cause of shrinkage<\/a> remains theft. <\/p>\n\n\n\n Shrinkage appears in various forms, including administrative errors, spoilage, vendor mistakes, or mismatched data. Warehouse supervisors often point to misplaced stock and delayed system updates as common causes of inventory variance.<\/p>\n\n\n\n \u201cAccording to warehouse supervisors, misplaced stock and delayed system updates are the most common causes of inventory variance.\u201d<\/em><\/p>\n\n\n\n Sometimes it\u2019s shoplifters. Often, it\u2019s employees. At other times, it\u2019s gaps in vendor deliveries or systems that don\u2019t flag problems quickly enough. No matter the label, shrinkage usually results from things slipping through the cracks or from people taking advantage when no one is watching. <\/p>\n\n\n\n According to the 10-10-80 rule, 10% of people will never steal, 10% will always steal, and the remaining 80% might, if they think they can get away with it.<\/p>\n\n\n\n <\/p>\n\n\n\n It\u2019s that 80% that causes most of the shrinkage. Not out of malice, but because the opportunity was there and no one was watching.<\/p>\n\n\n\n That\u2019s why absolute protection means more than just tracking stock. It means having systems that see<\/em> what\u2019s happening in real-time, so you can act before small losses turn into major ones.<\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n Before you lift a single box or scan a single barcode, stop. You need to determine what your system indicates is in stock.<\/p>\n\n\n\n Recorded inventory is the official, on-paper record of what you are supposed to have in stock. It’s the first step and is done before any physical inventory count or cycle count process begins.<\/p>\n\n\n\n If you’re an inventory manager, your first step is to pull the latest inventory report from your system and freeze all stock movement during that snapshot to ensure accuracy. Meanwhile, the ERP Admin checks that the report reflects clean, reliable data, with no sync errors, outdated entries, or missing SKUs. This data typically comes from:<\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n Actual inventory is the physical count of what\u2019s actually in your warehouse, stockroom, or storefront. <\/p>\n\n\n\n This step comes in after you\u2019ve locked in your recorded numbers and paused operations. Most companies do this during off-hours, slow seasons, or at the end of the quarter.<\/p>\n\n\n\n This is the step where everything gets exposed: what your system says you have and what\u2019s really on your shelves.<\/p>\n\n\n\n You are about to find out the value of the inventory you have on hand after misplaced stock, shrinkage, scanning errors, and theft. Here’s how you can start counting.<\/p>\n\n\n\n <\/p>\n\n\n\n Walk through your storage areas and divide them into logical zones (e.g., Aisle 1, Shelf B, Stockroom Section C). Assign one team or person per zone with clear responsibility for that area.<\/p>\n\n\n\n <\/p>\n\n\n\n You can use a printed count sheet, as shown above, or scan the item name and expected quantity columns using a mobile device, or upload it to a mobile inventory app or scanner tool (such as Sortly<\/a>, Zoho Inventory<\/a>, or even Google Sheets<\/a> on tablets).<\/p>\n\n\n\n Have your team manually count the physical items in each location or use a scanner. Touch it, see it, count it, and log it directly on the sheet or device.<\/p>\n\n\n\n Temporarily pause order fulfillment, receiving, and transfers during the count. Post signs, notify the team, and restrict access as needed. Make it a non-negotiable.<\/p>\n\n\n\n Once the first count is complete, assign a supervisor or a second team to recount high-risk items. Compare both numbers. If there\u2019s a mismatch, investigate before finalizing the data.<\/p>\n\n\n\n <\/p>\n\n\n\n Now, immediately after both recorded and actual inventory numbers are finalized, you subtract the actual inventory value from the recorded inventory value.<\/p>\n\n\n\n You want to do this while everything is fresh, the data is locked, and movement is still paused. Inventory managers and finance teams often collaborate at this stage to reconcile discrepancies and identify the root cause of stock issues.<\/p>\n\n\n\n To find your shrinkage rate, subtract the actual inventory from the recorded inventory. Shrinkage (%) = (Recorded Inventory \u2013 Actual Inventory) \u00f7 Recorded Inventory \u00d7 100<\/strong><\/p>\n\n\n\n For example<\/p>\n\n\n\n Let\u2019s say your recorded inventory<\/strong> shows $10,000<\/strong> worth of stock. Shrinkage = ($10,000 \u2013 $9,200) \u00f7 $10,000 \u00d7 100<\/strong> Your shrinkage rate is 8%<\/strong>, meaning that 8% of your stock is missing or unaccounted for.<\/p>\n\n\n\n And while 8% is high, even a small percentage matters, especially at scale.<\/p>\n\n\n\n <\/p>\n\n\n\n If you are ready to move from identifying the problem to reducing it, see our guide to shrinkage control best practices<\/a>.<\/p>\n\n\n\n <\/p>\n\n\n\n <\/p>\n\n\n\n RFID (Radio Frequency Identification)<\/strong> tags are small chips with antennas that transmit product data when scanned by a reader. Handheld RFID readers<\/strong> are mobile devices that detect these tags using radio waves, even if the tags are out of sight or behind packaging.<\/p>\n\n\n\n Unlike barcodes, RFID doesn\u2019t need to be visible, allowing staff to scan dozens or even hundreds of items in seconds, even through boxes or on shelves. This means faster stock checks, easier audits, and a better chance of catching missing or misplaced items before they become a problem. By tagging products and scanning them as they move through the store or warehouse, teams can identify shrinkage early and take prompt action.<\/p>\n\n\n\n<\/figure>\n\n\n\nInventory shrinkage calculation:<\/h2>\n\n\n\n
\n
Step #1: Determine recorded inventory:<\/strong> <\/h3>\n\n\n\n
\n
Step #2: Determine actual inventory:<\/strong><\/h3>\n\n\n\n
<\/figure>\n\n\n\nBreak your space into zones. Assign teams:<\/strong><\/h4>\n\n\n\n
Use printed count sheets:<\/strong><\/h4>\n\n\n\n
<\/figure>\n\n\n\nPhysically count every single item:<\/strong><\/h4>\n\n\n\n
Freeze inventory movement during the count. No products in. No products out:<\/strong><\/h4>\n\n\n\n
Double-check critical SKUs, especially those with high value or high turnover:<\/strong><\/h4>\n\n\n\n
Step # 3: Calculate the difference:<\/strong> <\/h3>\n\n\n\n
<\/figure>\n\n\n\nStep #4: Calculate the shrinkage rate:<\/strong><\/h3>\n\n\n\n
Then divide that number by the recorded inventory and multiply by 100 to get the percentage.<\/p>\n\n\n\n
But when you count it, your actual inventory<\/strong> is only $9,200<\/strong>.<\/p>\n\n\n\n
<\/strong> = $800 \u00f7 $10,000 \u00d7 100 = 8%<\/strong><\/p>\n\n\n\n<\/figure>\n\n\n\nFrom inventory count to shrinkage control. How does tech powers inventory accuracy?<\/h2>\n\n\n\n
\n
RFID tags and handheld readers:<\/strong><\/h3>\n\n\n\n
How RFID tags and handheld readers help with shrinkage calculation:<\/strong><\/h4>\n\n\n\n
![\"Warehouse](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/Warehouse-worker-scanning-boxes-to-update-inventory-records-and-reduce-shrinkage.webp\")
<\/figure>\n\n\n\n![\"Security](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/Security-camera-monitoring-space-to-help-prevent-inventory-theft-and-shrinkage-1024x683.webp\")
<\/figure>\n\n\n\n![\"AI](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/AI-surveillance-icon-symbolizing-smart-monitoring-to-reduce-inventory-shrinkage-risks.webp\"){kind=icon}
<\/figure>\n\n\n\n![\"Advanced](\"https:\/\/sirixmonitoring.com\/wp-content\/uploads\/2025\/07\/Advanced-security-control-room-using-AI-to-detect-and-prevent-inventory-loss-and-theft-1-1024x574.webp\")
<\/figure>\n\n\n\n