Pareto Principle in Inventory Management

The Pareto Principle, often referred to as the 80/20 rule, suggests that in inventory management, about 20% of items typically account for 80% of a company's sales or value. This means that a small number of products are crucial for achieving most of the business’s profitability. By identifying and focusing on this vital minority, businesses can optimize their inventory management, ensuring they stock the right items in the right amounts. This approach not only improves efficiency but also helps reduce costs and enhance customer satisfaction by meeting demand more effectively.