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Shrinkage has multiple meanings, depending on the context.
Retailing
In retailing, shrinkage (sometimes truncated to shrink) is the loss rate of products between point of manufacture and point of sale. Sometimes shrinkage may be as high as 15% to 20% of total volume, having a major negative impact on profits. The average shrink percentage in the retail industry is about 2% of sales. Shrinkage is often considered a cost of doing business in retail.
Shrinkage is for a large part due to theft or some other crime, and the prevention of this type of shrinkage is one reason for security guards and cameras. Also, some shrinkage is due to damage in transit, shipping errors, or misplaced goods.
The four major sources of inventory shrinkage in the retail industry are:
- Employee theft
- Shoplifting
- Administrative errors
- Vendor fraud
The National Retail Security Survey is published annually as part of the Security Research Project at the University of Florida. The Security Research Project endeavors to study various elements of workplace related crime and deviance with a special emphasis on the retail industry.
Statistics
In statistics, shrinkage is a general technique to improve an estimator, and to regularize ill-posed inference problems. Shrinkage is implicit in Bayesian inference and penalized likelihood inference, and explicit in James-Stein-type inference. In contrast, maximum-likelihood and least-squares estimation procedures do NOT include shrinkage effects.
Slang
"Shrinkage" is also a slang term for a decrease in penis size due to cold temperatures, especially swimming in cool water. This reflex is an attempt by the genitalia to stay closer to the core of the body, so that correct temperature for sperm production can be maintained in the testicles. The term was largely popularized by the 1994 episode "The Hamptons" of the NBC sitcom Seinfeld.
See also
Supply chain management | Management | Distribution, retailing, and wholesaling
"Shrinkage"