What is a primary reason inventory shrinkage occurs?

Inventory shrinkage primarily occurs due to internal or external theft, which can significantly impact a business's bottom line. Theft can happen in various ways, including shoplifting by customers (external theft) or dishonest actions by employees (internal theft). The reality of shrinkage is that it represents a loss of inventory that was never sold, and addressing this issue is crucial for maintaining profitability.

High sales volume can sometimes lead to issues related to inventory management or fulfillment, but it is not a direct cause of shrinkage. Increased employee training typically aims to improve operational efficiency and reduce mistakes, thereby potentially minimizing shrinkage rather than contributing to it. Frequent inventory audits are essential for detecting problems but generally serve as a preventative measure against shrinkage rather than a contributing factor.