By Shrinkage what I understand is the amount or percentage of material undergoing dimensional transformation and hence not fitting in the acceptable parameters or quality standards for usage on shop floor or for making the final product. Shrinkage in some industries also includes spoilage, employee theft, or any other miscellaneous reason of loss in stock of that item in inventory. Safety stock is one factor that can be derived out over a period of time with the real life experience, past data and analysis what is the percentage that can be assumed as ‘Shrinkage’. This may vary in actual scenario and will not remain constant. But still the estimated or average value can be built in as a part of safety stock, minimum reorder value, wip etc. But measurement of Shrinkage and averaging it for current/future reference is surely a very important factor to arrive at re-order level or minimum stock value or safety stock value of any thru-hole component.

By Shrinkage what I understand is the amount or percentage of material undergoing dimensional transformation and hence not fitting in the acceptable parameters or quality standards for usage on shop floor or for making the final product. Shrinkage in some industries also includes spoilage, employee theft, or any other miscellaneous reason of loss in stock of that item in inventory. Safety stock is one factor that can be derived out over a period of time with the real life experience, past data and analysis what is the percentage that can be assumed as ‘Shrinkage’. This may vary in actual scenario and will not remain constant. But still the estimated or average value can be built in as a part of safety stock, minimum reorder value, wip etc. But measurement of Shrinkage and averaging it for current/future reference is surely a very important factor to arrive at re-order level or minimum stock value or safety stock value of any thru-hole component.