Cost of shrinkage is a business term used to describe the total cost of all losses in inventory that occur due to theft, damage, or other causes. This can include lost sales, restocking fees, labor costs associated with the investigation of losses and the prevention of further losses, and any other related administrative costs. The goal of reducing cost of shrinkage is to maximize profits and minimize product waste. Companies use inventory management control systems, analytics tools, and employee training initiatives to reduce the overall cost associated with shrinkage.