Stock Goes Down: Normal Shrinkage or Loss Worth Tracing?
Depo heads adjust stock quantities because goods are damaged, discarded, or differ from the count, but the reason for each change does not yet become a record that can be reviewed together.
Conceptual illustration. The case is real; company details are disguised.
In the fresh food distribution operation I handled together with my team, depo heads could previously adjust inventory directly. Damaged goods, discarded goods, and count differences could all end up as the same thing: a changed stock figure. The process did not yet place the explanation and the evidence for each item in a flow with a second reviewer. Once the number had changed, the end result alone could not explain why the adjustment was needed.
On the Finance side, the problem showed up as a combined gap between purchases and sales. The company could see the loss in the overall result, but had no breakdown to show which items needed tracing. As a result, the discussion easily stopped at the size of the gap. To find the cause, the team had to go back to the items, the conditions at the depo, and the changes already made to the inventory records.
As head of the IT Division, I worked with the team to provide a report showing incoming and outgoing adjustments on the same item. An incoming adjustment adds to the inventory record, while an outgoing adjustment reduces it. From this report, the depo team can see the changes that make up the shortfall on a particular item. The conversation about loss gets a more concrete starting point: the item name, the depo, the period, and its movement records.
The change in how authority is divided came from the depo teams themselves. Stock changes are highly sensitive to loss and discarded goods, which affect the company's losses and the depo team's KPIs, so they chose two-person control. Since July 2026, staff submit an adjustment together with its reason, while the depo head or a supervisor on duty reviews and decides. For incoming adjustments, outgoing adjustments, and the recording of discarded goods, stock changes only after approval is given. Staff report the conditions they find without also holding the right to change the inventory quantity directly.
On the request form, staff choose the item, the type of change, the quantity, and the reason for the adjustment. The depo head then has material to check whether the change matches the conditions reported. If a request does not yet fit, staff correct the evidence and resubmit it. This process separates the need to record field conditions from the decision to apply the change, so an inventory correction passes a review before it becomes the stock figure that operations use.
For recording discarded goods, staff attach a photo of the goods' condition. The depo head can see the written reason together with the image when deciding on the request. Once approved, the record shows the item, quantity, reason, photo, and the person who approved it. In this flow, a decrease in stock has context that can be reopened. A review no longer starts only from the final figure that has already changed, but also from the material that accompanied the decision to adjust.
The Stock Movement Report is where the depo head and admin review these adjustments together with other item movements. Discarded goods have a different record from a correction to the inventory quantity, so tracing is directed to the matching condition, rather than treating every shortfall as the same event.
So how do you tell normal shrinkage from loss? Normal shrinkage has a limit, expressed as a ratio to the original weight of the item. As long as the decrease stays within that ratio, it counts as normal shrinkage. A loss worth tracing shows up when the decrease exceeds that ratio. The stock report shows which items have decreased and the changes behind them; whether a decrease exceeds the ratio, and why, is judged by people who understand the operation.
Finance uses this movement recap in its monthly evaluation and as input for preparing financial statements. The per-item breakdown connects conditions at the depo with the discussion of the value of losses. The operations team can trace the reasons and the condition of the goods, while Finance reads the impact on inventory. Both roles meet at the same record, so the discussion no longer depends only on the overall gap between purchases and sales.
For me, the important change lies in what accompanies the stock figure. In the earlier process, a correction could be complete the moment the quantity was updated. In the new flow, the types of adjustment that require approval carry a reason and the reviewer's decision before they are applied. Afterward, the report provides item-level detail for evaluation. Recording and the division of responsibility complement each other: the team has material to discuss loss, and the party who holds the decision over each correction.
The lesson from this work: a stock figure that matches does not necessarily explain where the goods went. The reason for an adjustment and the review of the item are what make a gap traceable, rather than merely closed by changing a number.