Calculating the shrinkage rate: value and quantity

You need to compare two warehouses: one has a shortage of 4.5 million so'm, the other 3 million. Is the first worse? We cannot tell, because they work at different scales. A shortage in so'm depends on volume, and comparison needs a ratio. The shrinkage rate = value lost ÷ base × 100. One question matters most: what do we take as the base?

The formula and the choice of base

Two bases are used most often.

• Against sales: shortage ÷ sales for the period × 100. It shows what part of turnover the losses eat.
• Against average stock: shortage ÷ average stock × 100. It shows how well the goods sitting in the warehouse are protected, regardless of turnover.

An important condition: all amounts at the same prices, that is, at cost. If shortage is given at cost but sales at retail prices, the percentage comes out wrong.

Example (one year, million so'm, at cost). Tashkent warehouse: sales 900, average stock 300, shortage 4.5. Regional warehouse: sales 300, average stock 150, shortage 3.0.

• Tashkent: 4.5 ÷ 900 = 0.5 percent of sales, 4.5 ÷ 300 = 1.5 percent of stock.
• Region: 3.0 ÷ 300 = 1.0 percent of sales, 3.0 ÷ 150 = 2.0 percent of stock.

In so'm Tashkent looks worse, but in percent the regional warehouse is twice as bad. Whichever base you choose, write it down and keep to it.

Value and quantity

Calculate the rate separately in units and in so'm. A warehouse holds 20 000 units worth 400 million so'm. The shortage is 300 units worth 10 million so'm. By quantity 300 ÷ 20 000 = 1.5 percent, by value 10 ÷ 400 = 2.5 percent.

If the value-based rate is higher, the lost goods are dearer than average. Check: average cost in the warehouse is 400 million ÷ 20 000 = 20 000 so'm, while one lost unit costs 10 million ÷ 300 ≈ 33 333 so'm, which is 1.67 times more. So the problem lies in expensive positions. In the opposite case, when the quantity-based rate is higher, a lot of cheap small items are going missing.

The overall rate also hides differences between groups. Suppose at another warehouse group A, with 250 million so'm of stock, has a shortage of 0.4 percent (1.0 million), while group C, with 30 million of stock, has 2 percent (0.6 million). In C the rate is five times higher, yet in so'm A loses more. Look at the rate by ABC group too, and set priorities with the so'm amounts in mind.

Net and gross shrinkage

A count reveals not only shortages but also surpluses. Suppose the warehouse above has a shortage of 10 million and a surplus of 3.5 million so'm.

• Net loss: 10 − 3.5 = 6.5 million, which is 6.5 ÷ 400 ≈ 1.6 percent of stock. It shows the real loss in money.
• Gross: 10 + 3.5 = 13.5 million, 3.4 percent of stock. It shows the quality of record keeping, because a surplus is also an error (for example, a similar item was mixed up).

Report both. The net figure alone looks calm, while the mess in the records may be large.

Use the same period

Divide a quarterly shortage by annual sales and the percentage comes out four times too small. Example: the quarter's shortage is 2.5 million, annual sales 900 million, the quarter's sales 225 million. Correct: 2.5 ÷ 225 ≈ 1.1 percent. Wrong: 2.5 ÷ 900 ≈ 0.3 percent. The shortage and the base must cover the same period. Do not compare monthly, quarterly and annual figures directly: a quarterly 2.5 million is 0.83 million a month and about 10 million a year.

Excel, and the "how much is good" question

On one sheet, columns: period, sales (at cost), average stock, shortage, surplus. Percentages: shortage ÷ sales, shortage ÷ stock, (shortage − surplus) ÷ stock.

There is no universal answer to "what percentage is good". External benchmarks may refer to a different type of goods and a different counting method, so compare with your own warehouse's history and with similar warehouses. For perishable, small and expensive goods it is better to set separate limits.

Conclusion

The shrinkage rate turns a so'm figure into one that can be compared, but only when the base and the period are clearly defined. After a stock count, CountLab calculates net and gross shortage by category and zone and presents it in the management report.