Inventory Insights: Applying the 80/20 Rule to SKU Rationalization
SKU rationalization using the Pareto Principle, or the 80/20 rule, can dramatically streamline your inventory and boost efficiency.
This principle suggests that 80% of your sales likely come from just 20% of your SKUs.
By identifying these top-performing products, you can focus on what truly drives your business forward.
Start by analyzing sales data to pinpoint which SKUs are performing best.
You’ll likely find that a small portion of your total SKUs generates the majority of revenue.
Consider reducing or eliminating lower-performing SKUs to minimize costs and simplify inventory management.
If your business is in the middle of a crisis, liquidating or selling your underperforming SKUs at a discount can help inject some emergency cash into your business, enabling you to keep the doors open.
If most of your sales are coming from a small portion of your SKUs, then you have a treasure chest of capital waiting to be opened.
So, before you consider taking out a predatory loan, take a look around your warehouse.
You may have the cash you need already; you just haven’t looked in the right places.
– Jesse Brown, Founder/CEO
Inventory Insights: Applying the 80/20 Rule to SKU Rationalization
