A loss implies a reduction of something.
Shrinkage is the action and effect of diminishing (making something go down or diminish, consuming a part of something, removing some part of a certain quantity ). A waste, therefore, is a portion of something that is subtracted or consumed naturally .
For example: “The company has suffered a significant decrease in income in the last year,” “The decline in agricultural production threatens the economy of the Pampas towns,” “The manager announced that there will be a decrease in salaries due to the economic crisis.”
To understand what the term shrink means, it is useful to find its etymological origin. Specifically, when doing so we will discover that it is a word that emanates from Vulgar Latin and more precisely from the word minimare , which can be translated as “reduce something to the minimum” .
Loss in business administration
In business administration , shrinkage is known as the reduction in the quantity of merchandise that produces a difference between the inventory books and the actual quantity of products available . Shrinkage can occur due to natural reasons (when perishable products expire), operational (goods are damaged during the company's usual operations), administrative (a failure in registration) or external (theft) reasons.
As we have seen, many can be the causes of a company suffering a significant loss that translates into a notable reduction in its profits. However, among all those reasons, we can establish that, from the point of view of human resources, the situation can be caused by employees who identify themselves as being disloyal to the entity and who, behind the backs of their bosses, act by carrying out actions that harm them and the industry in general.
In the same way, at a human level, we can also rule that both personnel who are not part of the company's staff but who work indirectly for it and those who are included within it but that has problems with agents outside of it.
In a situation of economic crisis , many entities suffer notable losses in their profits, which means that they are in very complicated situations of stability or that they must close permanently. And the consumption of ordinary citizens is reduced, among other things.
Inflation generates a decrease in the purchasing power of the population.
A quantifiable reduction
At a general level, shrink is a reduction of a certain amount from the total of something quantifiable .
It is said that the purchasing power of the population suffers a decrease when a high inflation rate is recorded. If a person earns 2,000 pesos per month and inflation is equal to 0 , said person has a monthly purchasing power of 2,000 pesos . On the other hand, if the subject obtains the same salary but there is inflation of 4% per month, the purchasing power will experience a decrease even if the individual has received the same amount of money as in the previous months.