Direct answer. Shrinkage (démarque inconnue) is the gap observed between theoretical stock, derived from accounting or the information system (WMS, ERP), and the physical stock actually present in a warehouse or store, with no cause precisely identified at the time it is recorded. It covers losses of various origins: internal or external theft, unreported breakage, and administrative or picking errors.
A gap with multiple causes, rarely a single origin
The word "unknown" does not mean the cause remains a permanent mystery, but rather that the gap has not been linked to a specific event at the time it is observed, unlike a reported breakage or a recorded return, which are "known" and tracked losses. In practice, shrinkage adds up several sources: theft by third parties or employees, undetected picking or data-entry errors, expired products discarded without being logged, or discrepancies stemming from process failures between receiving, storage and shipping.
Shrinkage is generally measured as a percentage of revenue or of the value of theoretical stock, over a given period. It is calculated at the time of stocktakes, whether an annual inventory or a more frequent cycle count. Regular cycle counting is, in fact, one of the main levers for limiting shrinkage: by narrowing the interval between two counts, it becomes easier to trace a gap back to a specific cause and correct the process upstream, rather than letting discrepancies accumulate over a full year before they are noticed.
FAQ
What are the causes of shrinkage?
The most common causes are theft (internal or external), unreported breakage, undetected picking or data-entry errors, and process gaps between receiving, storage and shipping. Several causes usually combine to form the total gap observed.
How do you calculate the shrinkage rate?
The shrinkage rate is calculated by comparing the value of the gap between theoretical stock and physical stock found at inventory to the value of revenue or theoretical stock over the same period, expressed as a percentage. This rate is generally tracked from one period to the next to assess whether corrective measures are working.
How can you reduce shrinkage in a warehouse?
Common levers include more frequent cycle counting to catch discrepancies earlier, tighter controls at sensitive points (receiving, shipping, returns), and better traceability of stock movements via the WMS, particularly for high-value items.
Related terms
Cycle counting · Safety stock · Turnover rate · Reverse logistics · Slotting · FIFO / LIFO / FEFO.
See also: automating a warehouse without construction work.
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