Treat shrinkage as a discrepancy to explain
Warehouse shrinkage means the recorded inventory and the actual inventory do not match after the relevant accounting adjustments. The cause may involve receiving, picking, returns, damage, transfers or unauthorized removal. Begin with a reliable count and a traceable record, not an accusation.
Assign an operations owner for the review and involve finance or inventory specialists where appropriate. Security can help preserve relevant observations and access records within its scope. It should not substitute for stock-control expertise.
Follow one item through the process
Choose a specific product or discrepancy and trace its receiving record, storage movement, order picking, dispatch, return and adjustment history. Confirm that dates, units of measure and item identifiers are consistent.
A carton, unit and pallet may be recorded differently across systems. An apparent loss can arise from that mismatch. Record uncertainties and ask the responsible team to resolve them before treating the variance as a physical disappearance.
Examine the handoffs between teams
Look at where responsibility moves from carrier to receiving, receiving to storage, storage to picking and dispatch to carrier. Each handoff should have an appropriate reference and an owner for exceptions.
For returns or damaged goods, confirm who authorizes the adjustment and where the physical stock goes. A written-off item should not remain in an ambiguous location without a documented status. Keep the investigation proportionate and avoid indiscriminate collection of employee information.
Preserve relevant records before routine deletion
If the facts suggest an incident, notify the authorized owner of access logs, transaction records or camera footage promptly. Follow approved preservation procedures and any applicable legal guidance. Do not alter the original records to make the timeline simpler.
Keep observations separate from hypotheses. “The last recorded transfer occurred before the count” is a fact if supported by the record; “the transfer team took the stock” is a conclusion requiring evidence. That distinction protects both the investigation and employees.
Correct the process and check the result
Once a cause is supported, assign a targeted correction: clearer unit definitions, reconciliation at a handoff, controlled adjustment approval or another evidence-based action. Set a review date and compare like periods or transactions.
Do not declare success solely because the next count is smaller or larger. Confirm that the records and physical process now agree. A useful shrinkage review ends with a documented explanation, a responsible owner and evidence that the correction works.
Quick review checklist
- Reliable physical count
- Consistent item and unit definitions
- Traced operational handoffs
- Preserved relevant records
- Verified corrective action
Put the process into your site plan
Use this guide alongside our article on cargo pickup verification. To discuss the responsibilities, operating conditions and coverage your property or event needs, contact FSO Guard about the appropriate security scope.
Frequently asked questions
Is warehouse shrinkage always theft?
No. Counting, units of measure, damage, returns and transaction errors can also create discrepancies. Investigate the process before attributing a cause.
Where should an investigation begin?
With a reliable count and the relevant item’s transaction history, followed through each operational handoff.
What should security contribute?
Relevant observations and authorized preservation of access or incident records, within the agreed scope and without replacing inventory or financial review.
