Shrinkage and Spoilage

Shrinkage and spoilage refer to the loss of purchased or produced goods, in quantity or value, before they reach the point of sale. Spoilage typically describes losses caused by the nature of the product itself (drying out, evaporation, trimming waste, or perishables passing their expiry date), while shrinkage covers losses from breakage, theft, administrative errors, or miscounting. Because both directly reduce the value of your inventory, they need to be tracked accurately.

Monitoring shrinkage and spoilage matters because, when these losses go unrecorded, a gap opens between the actual stock on the shelf and the figure in your records, distorting cost calculations and profit margins. For example, if perishable items in a grocery store's fresh produce section spoil and are not logged at the end of the day, reports will show more stock than truly exists. Regular counts and category-level recording make loss rates visible and improve order planning. Using inventory management software to log losses by reason makes this far easier, and you can explore industry-specific needs on the grocery inventory software page.