What is stock shrinkage and how it’s affecting your warehouse?

Feb 20 2023

What is stock shrinkage and how it’s affecting your warehouse?


We know it, you know it. Running the warehouse (aka. The Backbone) of a retail business comes with multiple challenges that increase by the day, and making sure you are protecting profit loss takes time and effort. According to the 2020 National Retail Security Survey, stock shrinkage is currently, it's costing the industry a huge $61.7 billion. The good news is that understanding what stock shrinkage is and how is affecting your business can make your stock management and reverse logistics run smoothly. 


What is Stock Shrinkage? 

Stock shrinkage is the difference between the inventory you have on hand and the inventory you have reported. Causes of shrinkage could be anything from employees taking stock for personal use (internal shoplifting), products getting damaged during storage or transportation, or a counting mistake. Regardless of the cause, it's a loss for your business and can be prevented with a stock shrinkage strategy. 


Sources of Stock Shrinkage in Your Warehouse: 

  1. Theft by employees or external parties 

  2. Physical damage during handling and storage 

  3. Administrative errors in record keeping 

  4. Products becoming outdated or reaching their expiration date 

  5. Human error during receiving, picking, packing, and shipping 

  6. Unwanted or defective returns 

  7. Products discarded due to spoilage, overproduction, or poor quality Addressing these causes through proper inventory management, security measures, and regular physical stock counts can help reduce stock shrinkage in warehouses. 

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How to Outsmart Shrinkage in Your Warehouse: 

Follow these tips to keep your inventory secure: 

  1. Implement effective retail loss prevention tactics: Implement an easy-to-use retail loss prevention system that includes video surveillance and access control, ensuring your security cameras can be viewed quickly and remotely.  

  2. Conduct regular physical inventory counts: This helps ensure accurate records and detects any discrepancies. 

  3. Train employees: Assign responsibility and educate employees on the importance of inventory accuracy and the consequences of theft or damage. 

  4. Implement proper inventory management practices: This includes using barcoding, RFID technology, or other automated systems to track inventory accurately. 

  5. Implement a smart retail returns process: Implement a process using a Transaction Checker to differentiate false return claims from real packing mistakes or damage. 

  6. Monitor access in high-risk areas with access control: Pay close attention to areas with higher rates of shrinkage and install access control for areas with high-value products or limited security. 

  7. Implement alarm zones: Prevent shrinkage using virtual barriers that could alert you when items fall off a conveyor belt or if someone crosses an un authorised area. 

These tips can help you reduce the impact of stock shrinkage on your business by keeping your inventory safe and secure. 


In conclusion, stock shrinkage is a common but preventable problem for retailers. By upgrading security measures, having proper inventory management, and creating a secure return process, you can effectively reduce the impact of stock shrinkage on your bottom line. Contact Morphean to find out how they can implement effective shrinkage-reducing retail solutions, including their Transaction Checker software, in your warehouse. 







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