Pareto principle

Pareto principle

1) The heuristic rule which states that where there is a large number of contributors to a result, the majority of the result is due to a minority of the contributors.

Sometimes known as the 80/20 rule which states that, in many cases, approximately 80 per cent of the turnover (stock, etc) can be ascribed to approximately 20 per cent of the customers, articles or orders. The actual ratio in a particular case can be determined by ranking the customers and products, etc in order of magnitude and then calculating what percentage of the turnover (stock, etc) corresponds to 10 per cent, 20 per cent, 30 per cent, etc of the customer and products, etc. The basis of ABC analysis. (Source: ILT Supply-Chain Inventory Management SIG)

Source: David Lowe. The Dictionary of Transport and Logistics. Kogan Page, 2002. – P.180 (288 p.)