← Back to glossary Category: Operațional Inventory Shrinkage Quick answer: The gap between book stock and physical stock, caused by theft, damage, expiry or recording errors. Key takeawaysOperational errors (receiving, picking, returns)Damage and expiry (FEFO not applied)Theft and fraud What shrinkage is Inventory shrinkage is stock loss not recorded as a sale: internal/external theft, damage, expiry, receiving or picking errors. It's expressed as a percentage of stock value. Why it matters to the board Shrinkage directly erodes margin and distorts the stock data replenishment relies on. A 1-2% shrinkage can mean tens of thousands of euros lost yearly. Sources Operational errors (receiving, picking, returns) Damage and expiry (FEFO not applied) Theft and fraud How Azuvio helps Azuvio reduces shrinkage through scanned receiving and picking, batch traceability, automatic FEFO and regular cycle counting, exposing loss sources per location and operator. Frequently askedHow do I measure shrinkage?As (book stock − physical stock) / book stock, usually by value, assessed at stocktake or through continuous cycle counting.Does technology reduce shrinkage?Yes. Scanning at receiving and picking, batch traceability and FEFO remove a large part of losses from errors and expiry. Where Azuvio fitsSoftware WMSConectori ERPSoftware OMS Related termsCycle counting — Continuous small-batch counting with no activity stops — modern alternative to annual physical inventory.Inventory accuracy — The degree of match between book stock (in the system) and physical stock (in the warehouse) — the operation's health metric.Stocktaking (physical inventory) — The process of physically verifying inventory and reconciling it with book records to establish the real asset position.Batch traceability — The ability to track a product batch across the whole chain, from supplier to end customer, for recall and compliance. Last updated: 2026-07-06