Inventory Shrinkage as Percentage of Inventory Value
Represents the reduction in the recorded inventory value that is not accounted for by sales. This includes theft, damage, miscounts, and other losses. Understanding shrinkage helps businesses adjust security measures, refine inventory processes, and improve profitability.
(Value of Lost Inventory / Initial Inventory Value) x 100
If the initial inventory value was $50,000 and the value of lost inventory is $1,000, the shrinkage rate is 2%.