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How do I measure stock shrinkage and stock variance in a retail business?
Shrinkage is the value of stock lost between what your records say you should have and what a physical count finds. Calculate book stock minus counted stock, and express it as a percentage of sales or of stock value.
Causes include theft, damage, supplier short deliveries, admin errors and mis-scanned items, so the figure alone does not tell you which one is at work.
Commonly misread:
- Comparing counts taken at different times of year or by different methods.
- Netting overages against shortages, so errors cancel out and hide problems.
- Assuming all variance is theft when receiving or transfer errors are common.
Count more often for high-value or high-variance lines, record adjustments with reason codes, and review variance by location, product and period.
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