Most people in this industry will have heard of the 80/20 rule, or Pareto Principle, as it's sometimes known. It's a basic theory that claims that around 20 per cent of any process is responsible for 80 per cent of the results of that process.
In manufacturing, for example, it is said that around 20 per cent of the defects in a product are responsible for around 80 per cent of the problems. The rule can apply to sales as well - in this case, 80 per cent of sales often come from 20 per cent of customers.
The term has its origins with Italian economist Vilfredo Pareto, who saw in the late 1800s that around 80 per cent of the land in his home country was owned by 20 per cent of the people. Further investigation showed that this rule applied in many other countries, as well. Pareto's principle was popularised and adapted for the business world in the 1940s, when it became clear that it was a smart way to analyse business results and figure out where to focus priorities.
Unsurprisingly, this rule also applies to the world of warehouse operations as well — running a Pareto analysis of a materials handling operation is a perfect way for a warehouse manager to figure out what to prioritise, what storage systems to use, and where different goods should be placed in the warehouse.
Are you interested in finding out more about the rule, and other factors you should bear in mind when analysing your goods flow? Click the button below to get our free guide: 'Warehouse storage systems: three important things to remember'.
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