ESSAY: Pareto’s Law

Review Pareto’s Law aka the 80/20 Rule in Chapter 4 and discuss how the 80/20 Rule can be applied toward warehouses. In 250-300 words discuss how the 80/20 rule may be applied to warehouse processes.

ANSWER

Pareto’s Law

            Deciding on the best media for storage is key to efficient warehousing. Planning storage requires specific tools; the 80-20 rule is one of the effective ways to determine the right media for storage. Often referred to as the Pareto’s law, the 80-20 rule is an important tool to analyze the combination of products stored in warehouses to establish a best-suited storage media for maximizing the utilization of space. The larger principle under Pareto’s law states that “80% of volume comes from 20% of products” (Grosfeld-Nir et al., 2007). Further explored, Pareto’s law states that 20% of the volume is comprised of 80% of products, which means putting this to use for warehousing requires exploring the principle. The principle emphasizes that 80% of the volume is derived from 20% of stock-keeping units (SKUs).

           Based on the information about Pareto’s law, one important rule of warehousing is governed by the 80/20 rule. The 80/20 rule influences inventory management in warehouses. According to Persky (1992), the most important application of Pareto’s law principle, especially for warehouse managers, is based on the layout of the facility and managing the inventory. More often, it is always accurate that 80% of warehouse operations represent 20% of SKUs in the building (Khanzode & Shah, 2017). This implies that there is minimal excuse to inquire about the order picker to pass hundreds of moving products to identify fast-moving products in the corner of a warehouse. By keeping fast-moving products close to the doors of warehouses, the needed time and distance traveled to pick orders are significantly…

References

Grosfeld-Nir, A., Ronen, B., & Kozlovsky, N. (2007). The Pareto managerial principle: When does it apply? International Journal of Production Research, 45(10), 2317-2325. https://www.tandfonline.com/doi/abs/10.1080/00207540600818203?scroll=top&needAccess=true&journalCode=tprs20

Khanzode, V., & Shah, B. (2017). A comprehensive review of warehouse operational issues. International Journal of Logistics Systems and Management, 26, 3, 346. https://www.researchgate.net/publication/312665644_A_comprehensive_review_of_warehouse_operational_issues Persky, J. (1992). Retrospectives: Pareto’s Law. The Journal of Economic Perspectives, 6(2), 181-192. https://www.aeaweb.org/articles?id=10.1257/jep.6.2.181