Vilfredo Pareto was an Italian economist and sociologist who lived between 1848 and 1923. His principle, also known as Pareto Rule or Pareto Law is a useful model in business to show that a minority of clients will be responsible for the majority of business sales.
Pareto’s principle states that 80% of a process is produced by 20% of the input. Applied to a warehouse, this translates as 20% of the goods that you store will be responsible for 80% of the demand.
While the 80-20 rule may not be an exact number when applied to a warehouse, it does illustrate that most warehouses will have some high-demand stock. This has implications on how warehouses are organised. Many warehouses organise stock according to categories. If the warehouse stores electrical goods, all the kettles are stored together and all the food mixers occupy the same warehouse area. Pareto’s principle changes this so that all high-demand goods are stored together. If 80% of demand is for 20% of your products, they should be stored together.
The advantage of storing all high-demand products together is that it cuts down travel time for the pickers. It does not matter if the number of high-demand products is more or fewer than 20%, because identifying high demand products and keeping them together can make the warehouse more efficient.
An efficient warehouse starts with quality pallet racking and warehouse shelving systems designed by Greenoaks. The design of the system is influenced by how products are categorised and stored.