What are common causes of shrink in inventory?

The common causes of shrink in inventory predominantly include internal and external theft. Internal theft refers to situations where employees steal merchandise or manipulate inventory records to mask shortages. This can include practices like taking inventory items home or underreporting sales to hide the loss. External theft, on the other hand, typically involves shoplifters or organized retail crime, where individuals steal items from a store without paying. Both forms of theft directly impact the company's bottom line by reducing available inventory and increasing loss percentages.

Understanding the dynamics of theft is critical for a loss prevention strategy, as it helps businesses implement effective measures for reducing inventory shrinkage. Through employee training, surveillance, and inventory management systems, companies can address these threats more strategically. The other options, while they can affect business operations, do not directly relate to the concept of inventory shrink in the same manner as theft does.