Key Performance Indicators (KPI)

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Inventory shrinkage rate (ISR)

Strategic perspective

Operational processes and supply chain perspective

Key performance question this indicator helps to answer

To what extent are we losing inventory along our internal processes?

Why is this indicator important?

Inventory shrinkage refers to the loss of products between the point where a product is produced or purchased and the point where it is sold. Losing inventory will push up costs for the producer and reduce profit margins for them and any retailer, which in turn are likely to be passed on and inflate prices for the consumer.

There are different reasons for inventory shrinkage, such as breakages, administrative errors, misplacement of goods, perishable goods not sold in time, etc. ...