The Crime Prevention Service for Business at Rutgers University School of Criminal Justice defines shrinkage as the difference between the inventory a business should have and what the:

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Shrinkage refers to the discrepancy between the inventory levels a business theoretically should have (based on records or inventory systems) and the actual physical inventory present. This difference can be due to various factors, including theft, damage, or administrative errors, but the definition focuses on the comparison between expected and actual inventory levels, not the specific reasons for the discrepancy.