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80/20 Inventory Rule

The 80/20 rule (Pareto Principle) applied to inventory states that approximately 80% of your sales come from 20% of your products. This insight helps you prioritize where to focus your inventory management efforts.

The 80/20 Principle

20%

of your products

β†’
80%

of your revenue

Focus your inventory management efforts on this critical 20%.

ABC Analysis: Extending the 80/20 Rule

ABC analysis classifies inventory into three categories based on value contribution:

A Items

Top 20% of SKUs

Account for ~80% of total value. Require tight control, frequent counting, and optimized reorder points.

  • Weekly cycle counts
  • Precise safety stock
  • Priority supplier relationships

B Items

Next 30% of SKUs

Account for ~15% of total value. Moderate control with periodic review. Balance between A and C approaches.

  • Monthly cycle counts
  • Standard reorder rules
  • Regular supplier check-ins

C Items

Bottom 50% of SKUs

Account for only ~5% of total value. Simplify management with basic controls and less frequent attention.

  • Quarterly or annual counts
  • Higher safety stock (simpler)
  • Automated reordering

How to Classify Your Inventory

1

Export your sales data

Pull annual sales by SKU from your inventory system.

2

Calculate revenue per SKU

Multiply units sold by unit price for each product.

3

Sort by revenue (highest first)

Rank all products from highest to lowest revenue.

4

Calculate cumulative percentage

Add running totals; products reaching 80% of total revenue are A items.

5

Assign categories

A = top 80% of value, B = next 15%, C = remaining 5%.

Focus on what matters with StockZip

StockZip helps you identify and track your most valuable inventory. Use tags, filters, and reports to focus your attention on the items that drive your business.

Need help? We've got answers

Common questions about scanning, offline mode, pricing, and migration.

The 80/20 rule (Pareto Principle) states that roughly 80% of your sales come from 20% of your products. It helps prioritize inventory management efforts on the items that matter most.