In FMCG (Fast-Moving Consumer Goods) industries, shrinkage and wastage are two distinct terms that refer to different types of losses within the supply chain. Here's the difference between shrinkage and wastage:
- Shrinkage: Shrinkage refers to the loss of inventory or products within the supply chain that cannot be accounted for, typically due to factors such as theft, damage, errors, or administrative discrepancies. Shrinkage can occur at various stages, including during production, transportation, warehousing, or retail operations. It is often associated with intentional or unintentional actions that result in a reduction in inventory levels.
Examples of shrinkage include shoplifting, employee theft, administrative errors, inaccurate record-keeping, damaged goods, or expired products. Shrinkage impacts the overall profitability of a business and can lead to inventory discrepancies, reduced revenue, and increased costs.
- Wastage: Wastage refers to the loss or disposal of products or materials that are no longer fit for use or consumption. It typically occurs due to factors such as product expiration, spoilage, obsolescence, quality issues, or production inefficiencies. Wastage is often associated with products that have reached the end of their shelf life, have become damaged or contaminated, or have become obsolete due to changes in consumer preferences or market demand.
Examples of wastage include expired perishable goods, damaged or broken products, products with manufacturing defects, or products that are no longer in demand. Wastage can result in financial losses, increased production costs, reduced customer satisfaction, and negative environmental impacts.
While shrinkage and wastage are distinct concepts, they both contribute to overall losses within the FMCG supply chain. Effective inventory management, quality control measures, accurate forecasting, improved security systems, and streamlined processes can help minimize shrinkage and wastage, improving operational efficiency and profitability in the FMCG industry.