{"id":4071,"date":"2022-11-22T22:36:30","date_gmt":"2022-11-22T22:36:30","guid":{"rendered":"https:\/\/www.shipbob.com\/uk\/inventory-kpis\/inventory-shrinkage\/"},"modified":"2025-10-14T19:20:36","modified_gmt":"2025-10-14T19:20:36","slug":"inventory-shrinkage","status":"publish","type":"page","link":"https:\/\/www.shipbob.com\/uk\/inventory-kpis\/inventory-shrinkage\/","title":{"rendered":"Inventory Shrinkage"},"content":{"rendered":"\n<section class=\"wp-block-shipbob-blocks-section-hero-standard-form hero-standard\"><div class=\"container row\"><div class=\"col hero-standard-content\"><h1 class=\"hero-standard-title \">Inventory Shrinkage Guide: Detect &amp; Prevent Losses<\/h1>\n<p>Inventory shrinkage is a common issue for retailers. It can lead to a drop in profits and require you to alter your accounting books, which will cost you even more time and money to fix.&nbsp;<\/p>\n\n\n\n<p>To combat significant inventory shrinkage, you must familiarize yourself with what it is, why it happens, and the preventative actions you can take. Let\u2019s take a look at inventory shrinkage and what you can do to avoid it.&nbsp;&nbsp;<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">So, what do you want to learn?<\/h4>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"#definition\">What is inventory shrinkage?<\/a><\/li>\n\n\n\n<li><a href=\"#calculate\">How to calculate inventory shrinkage rate<\/a><\/li>\n\n\n\n<li><a href=\"#impact\">How does inventory shrinkage impact ecommerce businesses?&nbsp;<\/a><\/li>\n\n\n\n<li><a href=\"#4\">The 4 main causes of inventory shrinkage<\/a><\/li>\n\n\n\n<li><a href=\"#7\">7 ways to prevent inventory shrinkage<\/a><\/li>\n\n\n\n<li><a href=\"#CTA\">Shrink shrinkage, scale profits: Discover ShipBob\u2019s services&nbsp;<\/a><\/li>\n\n\n\n<li><a href=\"#FAQ\">FAQs<\/a><\/li>\n<\/ul>\n<\/div><div class=\"col hero-standard-form offset-1  \"><div class=\"card hero-home-customer-card form-card\"><h3 class=\"form-title\">Request Fulfilment Pricing<\/h3><h3 class=\"h4 form-subtitle\">Let&#8217;s talk. Our experts can help you boost your order volume by 30% year over year.<\/h3><p class=\"form-copy\"><\/p><div class=\"card-body form-fbd53fc0-a20b-4df6-8df7-0fa1e8d5b8d4\" data-controller=\"form-controller\" data-form-controller-form-id-value=\"fbd53fc0-a20b-4df6-8df7-0fa1e8d5b8d4\" data-form-controller-form-container-query-value=\"form-fbd53fc0-a20b-4df6-8df7-0fa1e8d5b8d4\"><\/div><p class=\"form-note\">A fulfilment expert will get back to you shortly. <a href=\"\/privacy-policy\/\">Privacy Policy<\/a><\/p><\/div><\/div><\/div><\/section>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"definition\">What is inventory shrinkage?<\/h2>\n\n\n\n<div class=\"wp-block-shipbob-blocks-blog-arrow-card blog-arrow-card\">\n<p>Inventory shrinkage is when actual inventory levels are less than recorded inventory levels.&nbsp;<\/p>\n<\/div>\n\n\n\n<p>In other words, inventory shrinkage occurs when your <a href=\"https:\/\/www.shipbob.com\/blog\/physical-inventory\/\">physical inventory<\/a> count does not match the amount of inventory you recorded. Usually this means something has gone wrong, either from an accounting error, damage, or theft.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-why-you-should-calculate-inventory-shrinkage-nbsp\">Why you should calculate inventory shrinkage&nbsp;<\/h3>\n\n\n\n<p>Nobody wants to think about inventory shrinkage, but businesses can\u2019t afford to ignore it.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Like most other business losses, inventory shrinkage impacts your bottom line. For every piece of inventory that\u2019s unaccounted for, you\u2019re essentially throwing away money or losing product \u2013 so to ensure that your business stays afloat, it\u2019s critical to keep tabs on how much of your resources you\u2019re losing.&nbsp;<\/p>\n\n\n\n<p>Even more importantly, calculating inventory shrinkage is key to minimising it in the future, as an accurate calculation could give you a hint as to the shrinkage\u2019s cause.&nbsp;&nbsp;<\/p>\n\n\n\n<p id=\"calculate\">For example, if your inventory shrinkage percentage is consistently low, a sudden spike is probably just the result of a simple miscalculation. However, if it is always high, you should begin considering other, more nefarious causes, like shoplifting, employee theft, or vendor or <a href=\"https:\/\/www.shipbob.com\/blog\/supplier-manufacturer\/\">supplier<\/a> fraud.&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-how-to-calculate-inventory-shrinkage-rate-nbsp\">How to calculate inventory shrinkage rate&nbsp;<\/h3>\n\n\n\n<p>In order to discover precisely how inventory shrinkage has affected your business, you\u2019ll need to calculate, track, and monitor it over time.&nbsp;&nbsp;&nbsp;&nbsp;<\/p>\n\n\n\n<p>You can use the following formula to calculate your inventory shrinkage rate:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-style-large is-layout-flow wp-block-quote-is-layout-flow\">\n<p>Inventory Shrinkage Rate = <\/p>\n\n\n\n<p>(Recorded Inventory \u2013 Actual Inventory) \/ Recorded Inventory&nbsp;<\/p>\n<\/blockquote>\n\n\n\n<p>Then, multiply your inventory shrinkage rate by 100 to convert it into a percentage.&nbsp;<\/p>\n\n\n\n<p>Let\u2019s walk through an example:&nbsp;<\/p>\n\n\n\n<p>Let\u2019s say you recorded $70,000 in inventory value. Your cost of goods sold is $28,000. Your inventory\u2019s book value should be $42,000 ($70,000 \u2013 $28,000).&nbsp;<\/p>\n\n\n\n<p>However, due to shrinkage, you discover that the actual value of inventory is $63,000. You then use the inventory shrinkage rate to find out how much value you lost:&nbsp;<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-style-large is-layout-flow wp-block-quote-is-layout-flow\">\n<p>Inventory Shrinkage Rate = ($70,000 \u2013 $63,000) \/ $70,000&nbsp;<\/p>\n<\/blockquote>\n\n\n\n<p>This equals 0.10. Multiply 0.10 by 100 to show inventory shrinkage as a percentage: 10%.&nbsp;<\/p>\n\n\n\n<p id=\"impact\">Your inventory shrinkage rate is 10%, which means you lost 10% of your inventory value to shrinkage.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" height=\"280\" width=\"700\" src=\"https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/08\/97de36013181ae0cfacb3a0fa0b3ba59.jpg?w=1280\" alt=\"inventory tools\" class=\"wp-image-9868\" srcset=\"https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/08\/97de36013181ae0cfacb3a0fa0b3ba59.jpg?w=1400 1400w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/08\/97de36013181ae0cfacb3a0fa0b3ba59.jpg?w=160 160w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/08\/97de36013181ae0cfacb3a0fa0b3ba59.jpg?w=400 400w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/08\/97de36013181ae0cfacb3a0fa0b3ba59.jpg?w=768 768w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/08\/97de36013181ae0cfacb3a0fa0b3ba59.jpg?w=700 700w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/08\/97de36013181ae0cfacb3a0fa0b3ba59.jpg?w=1280 1280w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/08\/97de36013181ae0cfacb3a0fa0b3ba59.jpg?w=240 240w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-does-inventory-shrinkage-impact-ecommerce-businesses-nbsp\">How does inventory shrinkage impact ecommerce businesses?&nbsp;<\/h2>\n\n\n\n<p>Accounting for inventory shrinkage is crucial to growing your business. Without knowing where your products are going, you can lose out on profits, risk misrepresenting your value on accounting reports, and increase your <a href=\"https:\/\/www.shipbob.com\/blog\/cost-of-goods-sold\/\">cost of goods sold<\/a>.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-loss-of-product-nbsp\">Loss of product&nbsp;<\/h3>\n\n\n\n<p>The most obvious problem with shrinkage is that inventory gets lost and can\u2019t be retrieved. This means you don\u2019t have them on hand to sell, or even to repurpose in some other way.&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-money-thrown-away-nbsp\">Money thrown away&nbsp;<\/h3>\n\n\n\n<p>Every piece of inventory that is lost is money down the drain. You already invested funds to obtain the inventory in the first place, and if you no longer have the inventory on hand to sell, you will be unable to recoup that investment or make a profit. This cost can affect other aspects of your business, such as your hiring capacity, expense management, and more.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-accounting-and-tax-miscalculations-nbsp\">Accounting and tax miscalculations&nbsp;<\/h3>\n\n\n\n<p>If your <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-records\/\">inventory records<\/a> and sales records don\u2019t match, you will have to spend a significant amount of time reconciling your receipts and accounting records. If this information is full of errors, the IRS can get involved and potentially audit your business.&nbsp;<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-style-blog is-layout-flow wp-block-quote-is-layout-flow\">\n<p id=\"4\"><em>\u201cShipBob is our source of truth for shipping data. I also love the analytics tools, and so do my accountants. I can also see how my team is doing, tracking their order metrics as they fulfil orders. While we now pay for our own rent and the salaries of our fulfilment centre team, we have been able to save 10% and reinvest that into other parts of the business. It\u2019s been game-changing, while still having ShipBob be a part of our ecosystem.\u201d<\/em><\/p>\n\n\n\n<p>Courtney Lee, Founder of Prymal&nbsp;<\/p>\n<\/blockquote>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-the-4-main-causes-of-inventory-shrinkage-nbsp\">The 4 main causes of inventory shrinkage&nbsp;<\/h2>\n\n\n\n<p>There are plenty of root causes of inventory shrinkage, which will vary for brick-and-mortar and ecommerce businesses. Here are four of the most common causes of inventory shrinkage.&nbsp;&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2022\/07\/retail-distribution.jpg?w=1280\" alt=\"\" class=\"wp-image-1173\"\/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-consumer-theft-nbsp\">1. Consumer theft&nbsp;<\/h3>\n\n\n\n<p>Also known as shoplifting or external theft, this happens when someone comes into your physical store and steals a product. Depending on the type of products you sell, theft can be easy to prevent (locked cases, ink tags, etc.), or may require manual, psychical surveillance for smaller, less valuable inventory items (food, produce, etc.)&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" height=\"467\" width=\"700\" src=\"https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/11\/0ce4b28bda221c285ce06e28d9e11843.jpeg?w=1280\" alt=\"\" class=\"wp-image-10792\" srcset=\"https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/11\/0ce4b28bda221c285ce06e28d9e11843.jpeg?w=2250 2250w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/11\/0ce4b28bda221c285ce06e28d9e11843.jpeg?w=400 400w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/11\/0ce4b28bda221c285ce06e28d9e11843.jpeg?w=700 700w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/11\/0ce4b28bda221c285ce06e28d9e11843.jpeg?w=768 768w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/11\/0ce4b28bda221c285ce06e28d9e11843.jpeg?w=1536 1536w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/11\/0ce4b28bda221c285ce06e28d9e11843.jpeg?w=2048 2048w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/11\/0ce4b28bda221c285ce06e28d9e11843.jpeg?w=1280 1280w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2023\/11\/0ce4b28bda221c285ce06e28d9e11843.jpeg?w=240 240w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-employee-theft-nbsp\">2. Employee theft&nbsp;<\/h3>\n\n\n\n<p>With direct access to all of your products, employees may be capable of stealing from your inventory. While you\u2019ll want to hire employees you trust, you will also want to find ways to prevent internal theft (e.g., <a href=\"https:\/\/www.shipbob.com\/warehouse-management\/\" target=\"_blank\" rel=\"noreferrer noopener\">proper warehouse management<\/a> and security) and learn how to handle it when it occurs (which we\u2019ll cover in a later section).&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2022\/07\/shipping-damages.jpeg?w=1280\" alt=\"\" class=\"wp-image-874\"\/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-3-damage-nbsp\">3. Damage&nbsp;<\/h3>\n\n\n\n<p>Damage refers to anything that causes the inventory to become unsellable. This includes broken packaging, cracks, tears, water damage, product expiration, and more.&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" height=\"394\" width=\"700\" src=\"https:\/\/www.shipbob.com\/wp-content\/uploads\/2024\/01\/3d5fbdb0a041dc1e1ad66db5c784817e-scaled.jpg?w=1280\" alt=\"\" class=\"wp-image-11710\"\/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-4-management-errors-nbsp\">4. Management errors&nbsp;<\/h3>\n\n\n\n<p id=\"7\">Inventory management errors such as miscounting, using the wrong units of measurement, administrative errors, or any other type of human accounting error can lead to inventory shrinkage. This kind of error is still possible even when automation is used for <a href=\"https:\/\/www.shipbob.com\/inventory-management\/\" target=\"_blank\" rel=\"noreferrer noopener\">inventory management<\/a>, so make sure that you leverage best-in-class inventory management software and tools to avoid it.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-7-ways-to-prevent-inventory-shrinkage-nbsp\">7 ways to prevent inventory shrinkage&nbsp;<\/h2>\n\n\n\n<p>The good news is there are a lot of ways to prevent inventory shrinkage. Any combination of these methods may work depending on whether you are <a href=\"https:\/\/www.shipbob.com\/blog\/warehousing\/\" target=\"_blank\" rel=\"noreferrer noopener\">warehousing<\/a> products or have your own storefront.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-install-inventory-tracking-nbsp\">1. Install inventory tracking&nbsp;<\/h3>\n\n\n\n<p>Tracking items isn\u2019t hard and can help you see whether a piece of inventory disappeared out of the warehouse or the retail floor. For example, fashion brands in the retail industry have had great success with the ink blot tag systems. Grocers are even able to lock their carts if they leave the vicinity of their parking lot.&nbsp;<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-style-blog is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em>\u201cOne of our main priorities was finding a reliable partner that could store all of our inventory and provide tools that would help us manage it. We rely heavily on ShipBob for inventory tracking and forecasting and that\u2019s been a key part of our partnership. Our area of expertise is not logistics or inventory management, so we lean on ShipBob a lot for that. We\u2019ve learned so much about this industry since working with ShipBob, as they are true supply chain experts, which has been good for everyone on our team. <\/em><\/p>\n\n\n\n<p><em>When thinking about fulfilment, there\u2019s such a focus on the packing and shipping aspect that the inventory management piece can often go unnoticed. But ShipBob\u2019s ability to help us track and reconcile inventory is really great.\u201d<\/em><\/p>\n\n\n\n<p>Callie Tivnan, E-commerce Manager, and Christina Williams, Customer Success Manager at Barefaced&nbsp;<\/p>\n<\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-count-inventory-often-nbsp\">2. Count inventory often&nbsp;<\/h3>\n\n\n\n<p>When you count your inventory regularly, you\u2019ll have more opportunities to notice discrepancies \u2013 and you\u2019ll usually be able to catch those discrepancies more quickly. You can do this in a <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-cycle-count\/\">cyclical<\/a> manner to minimise the amount of time it takes, or use technology that can keep inventory counts updated in real-time (rather than in Excel, which is static and not synced to anything).&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-3-surprise-audits-nbsp\">3. Surprise audits&nbsp;<\/h3>\n\n\n\n<p>If employees are stealing from you and they know when audits are coming, it gives them time to prepare. With a surprise <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-audit\/\" target=\"_blank\" rel=\"noreferrer noopener\">inventory audit<\/a>, you can more quickly find anomalies in your inventory counts without prompting staff.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-4-heightened-security-measures-nbsp\">4. Heightened security measures&nbsp;<\/h3>\n\n\n\n<p>If you run a single brick-and-mortar store, it may be useful to install cameras and security systems in your shop or your <a href=\"https:\/\/www.shipbob.com\/warehouse-operations\/inventory-storage\/\" target=\"_blank\" rel=\"noreferrer noopener\">inventory storage system<\/a>. You can also make use of clear garbage bags to ensure no one is pretending something is trash but actually putting inventory in a bag that they take for themselves.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-5-split-responsibilities-nbsp\">5. Split responsibilities&nbsp;<\/h3>\n\n\n\n<p>If a single employee has access to recording and processing receipts, they could be tempted to falsify the reports. You can counteract this by letting different employees handle recording and processing receipts, which also helps bolster quality assurance.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-6-educate-employees-nbsp\">6. Educate employees&nbsp;<\/h3>\n\n\n\n<p>Employees may not be aware of how inventory shrinkage affects them. Use this as an opportunity to let them know how shrinkage affects them directly and indirectly, including how it decreases promotions, paychecks, employee profit shares, and more.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-7-work-with-an-expert-fulfillment-partner-nbsp\">7. Work with an expert fulfilment partner&nbsp;<\/h3>\n\n\n\n<p>Third-party logistics partners, or <a href=\"https:\/\/www.shipbob.com\/3pl\/\" target=\"_blank\" rel=\"noreferrer noopener\">3PL<\/a> providers, are professional fulfilment companies that help ecommerce businesses store inventory and fulfil orders. They take precautions to keep your inventory safe and secure while allowing merchants to <a href=\"https:\/\/www.shipbob.com\/ecommerce-fulfillment\/outsourced-fulfillment\/\" target=\"_blank\" rel=\"noreferrer noopener\">outsource fulfilment<\/a>, which is often costly and unproductive to manage in-house.&nbsp;<\/p>\n\n\n\n<p>The best fulfilment partners will also provide transparent reporting and technology to help you <a href=\"https:\/\/www.shipbob.com\/blog\/stock-control\/\" target=\"_blank\" rel=\"noreferrer noopener\">control stock<\/a> levels to prevent inventory shrinkage.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-shrink-shrinkage-scale-profits-discover-shipbob-s-services-nbsp\">Shrink shrinkage, scale profits: Discover ShipBob\u2019s services&nbsp;<\/h2>\n\n\n\n<p>As an expert supply chain partner, ShipBob does more than just store your inventory; we\u2019ll help your brand (and thousands more) manage inventory effectively so you can maximise your ROI, meet customer demand, and ultimately run a smoother, more profitable business.&nbsp;&nbsp;<\/p>\n\n\n\n<p>Here are just some of the ways that ShipBob helps brands like yours avoid inventory shrinkage while optimising inventory management.&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-real-time-insight-into-inventory-levels-to-minimize-loss-nbsp\">Real-time insight into inventory levels to minimise loss&nbsp;<\/h3>\n\n\n\n<p>ShipBob\u2019s platform features key inventory management capabilities, including access to <a href=\"https:\/\/www.shipbob.com\/inventory-management\/real-time\/\">real-time inventory<\/a> levels across all your sales channels and locations. With this degree of visibility, you can track how inventory is moving across your supply chain, if and where it\u2019s going missing, and nip inventory shrinkage in the bud.&nbsp;&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" height=\"601\" width=\"700\" src=\"https:\/\/www.shipbob.com\/wp-content\/uploads\/2022\/10\/b78956c954d5ea065cbfb4fc6d9a712f.jpg?w=1280\" alt=\"\" class=\"wp-image-15002\"\/><\/figure>\n\n\n\n<p>ShipBob also leverages barcode scanning at every stage of <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-flow\/\">inventory flow<\/a>, so inventory counts are automatically updated (as opposed to manually). This reduces human errors, saves you time, and enables you to maintain granular <a href=\"https:\/\/www.shipbob.com\/inventory-management\/inventory-visibility\/\">inventory visibility<\/a> even as you scale.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-strategic-inventory-distribution-for-faster-and-safer-fulfillment-nbsp\">Strategic inventory distribution for faster and safer fulfilment&nbsp;<\/h3>\n\n\n\n<p>The more you move and transfer inventory internally during the fulfilment process, the more chances there are for inventory to be lost in the shuffle, damaged, or stolen. As a result, you want to streamline your <a href=\"https:\/\/www.shipbob.com\/blog\/inventory-allocation\/\">inventory allocation<\/a> and distribution process as much as possible \u2013 and ShipBob can help.&nbsp;&nbsp;<\/p>\n\n\n\n<p><a href=\"https:\/\/www.shipbob.com\/product\/inventory-placement\/\">ShipBob\u2019s Inventory Placement Program (IPP)<\/a> is designed to take inventory balancing, allocation, and distribution off your plate and into the hands of trusted experts. It starts with our proprietary algorithm, which leverages your actual order data to calculate the inventory split across our fulfilment network that will best enable you to meet customer demand while <a href=\"https:\/\/www.shipbob.com\/ecommerce-shipping\/reduce-shipping-costs\/\">minimising shipping costs<\/a> and times.&nbsp;&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/08\/image-1-2.png?w=1280\" alt=\"\" class=\"wp-image-15072\"\/><\/figure>\n\n\n\n<p>From there, all you have to do is send your inbound inventory to a single ShipBob receiving hub, and ShipBob will take care of physically distributing your inventory to regional facilities for you. This simple process not only reduces opportunities for inventory shrinkage in transit, but can also save you time and money.&nbsp;&nbsp;<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-style-blog is-layout-flow wp-block-quote-is-layout-flow\">\n<p><em>\u201cRight after we partnered with ShipBob, we joined their Inventory Placement Program, which streamlines inventory distribution across the US, taking multi-location inbound shipments, inventory allocation, and rebalancing off merchants\u2019 plates. Since launching in the program, we\u2019ve been able to allocate our inventory across 4 of ShipBob\u2019s fulfilment centres in the United States, which cut our shipping times by a third \u2013 from 5.2 days down to about 3.6 days. <\/em><\/p>\n\n\n\n<p><em>Not only has transit time dropped, but at the same time we reduced fulfilment costs by over $2 per order compared with our old 3PL. This combination has been key to profitable growth this year. <\/em><\/p>\n\n\n\n<p><em>And the cost to split inventory this way? It\u2019s a no-brainer. It costs less for us to deliver all inventory to one location that\u2019s close to our manufacturer partners in NJ, and let ShipBob take care of splitting the inventory between the four different warehouses than it would for us to ship and handle logistics ourselves.\u201d<\/em><\/p>\n\n\n\n<p>Matt Crane, Co-Founder and Chief Science Officer at Semaine Health&nbsp;<\/p>\n<\/blockquote>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-built-in-analytics-to-spot-and-stop-shrinkage-trends-nbsp\">Built-in analytics to spot and stop shrinkage trends&nbsp;<\/h3>\n\n\n\n<p>ShipBob\u2019s analytics dashboard delivers the data and insights you need to manage your inventory effectively, including identifying and addressing inventory shrinkage. Along with real-time inventory levels at every stage of the fulfilment process, ShipBob\u2019s reporting covers:&nbsp;&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Average daily velocity per SKU&nbsp;<\/li>\n\n\n\n<li>Your best- and worst-performing SKUs&nbsp;<\/li>\n\n\n\n<li>Estimated inventory days on-hand&nbsp;<\/li>\n\n\n\n<li>Products and quantities out of stock&nbsp;<\/li>\n\n\n\n<li>Current inventory distribution&nbsp;<\/li>\n\n\n\n<li>Warehousing storage costs by product and location&nbsp;<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" height=\"324\" width=\"700\" src=\"https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/12\/933bcad60877f0ca97bcc0826cbbe1db.png?w=1280\" alt=\"Inventory Velocity\" class=\"wp-image-18268\" srcset=\"https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/12\/933bcad60877f0ca97bcc0826cbbe1db.png?w=1292 1292w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/12\/933bcad60877f0ca97bcc0826cbbe1db.png?w=160 160w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/12\/933bcad60877f0ca97bcc0826cbbe1db.png?w=400 400w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/12\/933bcad60877f0ca97bcc0826cbbe1db.png?w=768 768w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/12\/933bcad60877f0ca97bcc0826cbbe1db.png?w=700 700w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/12\/933bcad60877f0ca97bcc0826cbbe1db.png?w=1280 1280w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/12\/933bcad60877f0ca97bcc0826cbbe1db.png?w=240 240w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/figure>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" height=\"402\" width=\"700\" src=\"https:\/\/www.shipbob.com\/wp-content\/uploads\/2025\/02\/ecfa784a294634d8e1d650a9b419ef27.png?w=1280\" alt=\"\" class=\"wp-image-19772\" srcset=\"https:\/\/www.shipbob.com\/wp-content\/uploads\/2025\/02\/ecfa784a294634d8e1d650a9b419ef27.png?w=1958 1958w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2025\/02\/ecfa784a294634d8e1d650a9b419ef27.png?w=160 160w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2025\/02\/ecfa784a294634d8e1d650a9b419ef27.png?w=400 400w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2025\/02\/ecfa784a294634d8e1d650a9b419ef27.png?w=768 768w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2025\/02\/ecfa784a294634d8e1d650a9b419ef27.png?w=700 700w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2025\/02\/ecfa784a294634d8e1d650a9b419ef27.png?w=1536 1536w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2025\/02\/ecfa784a294634d8e1d650a9b419ef27.png?w=1280 1280w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2025\/02\/ecfa784a294634d8e1d650a9b419ef27.png?w=240 240w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/figure>\n\n\n\n<p>With this data, you can improve demand and inventory forecasting, monitor inventory movement across the fulfilment process, reorder inventory on time, and make more strategic inventory decisions and adjustments.&nbsp;&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-custom-packaging-and-careful-handling-for-brand-integrity-nbsp\">Custom packaging and careful handling for brand integrity&nbsp;<\/h3>\n\n\n\n<p>For brands worried about inventory getting lost or damaged in the packing processes, ShipBob\u2019s team of fulfilment experts follow a packing flow that includes checks and balances at every stage to minimise human errors and ensure product integrity. We can also accommodate kitting requests and <a href=\"https:\/\/www.shipbob.com\/blog\/custom-packaging\/\">custom packaging<\/a> \u2013 including branded boxes and polymailers \u2013 to help protect products in transit and deliver a memorable unboxing experience for your brand.&nbsp;&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-gallery has-nested-images columns-default is-cropped wp-block-gallery-1 is-layout-flex wp-block-gallery-is-layout-flex\">\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" height=\"700\" width=\"700\" data-id=\"17442\" src=\"https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/11\/032873b3a5c3fd21f5462c3a331301ba.webp?w=1080\" alt=\"\" class=\"wp-image-17442\" srcset=\"https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/11\/032873b3a5c3fd21f5462c3a331301ba.webp?w=1080 1080w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/11\/032873b3a5c3fd21f5462c3a331301ba.webp?w=160 160w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/11\/032873b3a5c3fd21f5462c3a331301ba.webp?w=400 400w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/11\/032873b3a5c3fd21f5462c3a331301ba.webp?w=768 768w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/11\/032873b3a5c3fd21f5462c3a331301ba.webp?w=700 700w, https:\/\/www.shipbob.com\/uk\/wp-content\/uploads\/sites\/32\/2024\/11\/032873b3a5c3fd21f5462c3a331301ba.webp?w=240 240w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/figure>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" height=\"933\" width=\"700\" data-id=\"17435\" src=\"https:\/\/www.shipbob.com\/wp-content\/uploads\/2024\/11\/172a67ec3663d57fe13e00db1419960c-scaled.jpg?w=960\" alt=\"\" class=\"wp-image-17435\" srcset=\"https:\/\/www.shipbob.com\/wp-content\/uploads\/2024\/11\/172a67ec3663d57fe13e00db1419960c-scaled.jpg?w=1920 1920w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2024\/11\/172a67ec3663d57fe13e00db1419960c-scaled.jpg?w=400 400w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2024\/11\/172a67ec3663d57fe13e00db1419960c-scaled.jpg?w=700 700w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2024\/11\/172a67ec3663d57fe13e00db1419960c-scaled.jpg?w=768 768w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2024\/11\/172a67ec3663d57fe13e00db1419960c-scaled.jpg?w=1152 1152w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2024\/11\/172a67ec3663d57fe13e00db1419960c-scaled.jpg?w=1536 1536w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2024\/11\/172a67ec3663d57fe13e00db1419960c-scaled.jpg?w=1280 1280w, https:\/\/www.shipbob.com\/wp-content\/uploads\/2024\/11\/172a67ec3663d57fe13e00db1419960c-scaled.jpg?w=240 240w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\" \/><\/figure>\n<\/figure>\n\n\n\n<p id=\"FAQ\">For more information on how ShipBob can help your brand minimise inventory shrinkage while optimising fulfilment, click the button below to get in touch.&nbsp;&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.shipbob.com\/quote\/\">Request a Quote<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-inventory-shrinkage-faqs-nbsp\">Inventory shrinkage FAQs&nbsp;<\/h2>\n\n\n\n<p>Here are answers to some of the most common questions about inventory shrinkage.&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-shipbob-blocks-single-faq single-faq direction-col\" data-controller=\"faq-controller\" data-faq-controller-open-value=\"true\"><div class=\"single-faq-title-contianer\"><h4 class=\"single-faq-title\">What is considered inventory shrinkage?&nbsp;<\/h4><div class=\"single-faq-expand\" data-faq-controller-target=\"expand\"><img decoding=\"async\" src=\"\/wp-content\/themes\/shipbob-2022\/resources\/svg\/plus-solid.svg\" \/><\/div><\/div><div class=\"single-faq-childs\" data-faq-controller-target=\"answer\"><div>\n\n<p>Whenever a SKU\u2019s inventory levels are less than they were recorded to be for accounting purposes, there has been inventory shrinkage. &nbsp;<\/p>\n\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-shipbob-blocks-single-faq single-faq direction-col\" data-controller=\"faq-controller\" data-faq-controller-open-value=\"true\"><div class=\"single-faq-title-contianer\"><h4 class=\"single-faq-title\">Is inventory shrinkage an expense?&nbsp;<\/h4><div class=\"single-faq-expand\" data-faq-controller-target=\"expand\"><img decoding=\"async\" src=\"\/wp-content\/themes\/shipbob-2022\/resources\/svg\/plus-solid.svg\" \/><\/div><\/div><div class=\"single-faq-childs\" data-faq-controller-target=\"answer\"><div>\n\n<p>Yes, inventory shrinkage is considered an expense. Every piece of inventory that\u2019s missing is essentially lost sales and money for your business, and should be considered an expense.&nbsp;<\/p>\n\n<\/div><\/div><\/div>\n\n\n\n<div class=\"wp-block-shipbob-blocks-single-faq single-faq direction-col\" data-controller=\"faq-controller\" data-faq-controller-open-value=\"true\"><div class=\"single-faq-title-contianer\"><h4 class=\"single-faq-title\">What is an inventory shrinkage example in retail?&nbsp;<\/h4><div class=\"single-faq-expand\" data-faq-controller-target=\"expand\"><img decoding=\"async\" src=\"\/wp-content\/themes\/shipbob-2022\/resources\/svg\/plus-solid.svg\" \/><\/div><\/div><div class=\"single-faq-childs\" data-faq-controller-target=\"answer\"><div>\n\n<p>Say a retail store records $10,000 in inventory value at the beginning of the year. Later, a basement flood damages $2,000 of inventory (making it unsellable) and an employee steals another $1,000 of inventory. This $3,000 of inventory would be considered inventory shrinkage, as it is lost to the business, and the business cannot sell it or recoup their initial investment in that inventory.&nbsp;&nbsp;<\/p>\n\n<\/div><\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>What is inventory shrinkage? In other words, inventory shrinkage occurs when your physical inventory count does not match the amount of inventory you recorded. Usually this means something has gone wrong, either from an accounting error, damage, or theft.&nbsp; Why you should calculate inventory shrinkage&nbsp; Nobody wants to think about inventory shrinkage, but businesses can\u2019t [&hellip;]<\/p>\n","protected":false},"author":149,"featured_media":0,"parent":4064,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"hub.php","meta":{"content-type":"","inline_featured_image":false,"footnotes":""},"class_list":["post-4071","page","type-page","status-publish","hentry"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.5 (Yoast SEO v27.5) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>What is Inventory Shrinkage? Examples, Causes, &amp; Fixes<\/title>\n<meta name=\"description\" content=\"Inventory shrinkage is a problem for any business. 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