Shrinkage is the reduction in usable inventory caused by spoilage, damage, administrative error or theft, and in food warehousing it is a key performance indicator for loss control and cold-chain integrity.
In trade practice
In frozen and dried food operations, shrinkage is recorded when product is rejected at incoming inspection, written off due to temperature excursion, or found to have expired unsold. Warehouse teams reconcile physical stock counts against system records at regular intervals to identify unexplained losses. Spoilage-related shrinkage is often traced to cold-chain failures or moisture ingress, both of which should be documented with temperature logs and inspection reports to support insurance or supplier claims. High shrinkage rates in a product category may trigger a review of storage conditions, rotation procedures or supplier quality.
In a specification
Some supply contracts include a shrinkage allowance clause that defines an acceptable percentage of loss per consignment, beyond which the supplier or logistics provider bears liability.