Certified Supply Chain Professional (CSCP) Practice Exam

What kind of losses does inventory shrinkage encompass?

1. Market fluctuations and competition

2. Scrap, perish, and theft

3. Obsolete stock and excess orders

4. Supplier damage claims

The correct answer is: Scrap, perish, and theft

Inventory shrinkage refers to the loss of products that a retailer or company experiences, which is not attributable to sales or documented loss. This usually encompasses various forms of loss, such as scrap (items that are damaged or unusable), perish (products that have a limited shelf life and can spoil or expire), and theft (which includes shoplifting as well as employee theft). These factors collectively contribute to the total inventory shrinkage, impacting the overall financial health of the organization. Recognizing and managing these specific causes is crucial for maintaining an efficient inventory system, minimizing financial losses, and improving overall operational performance.