What is the 80/20 inventory rule?

The foundation of every successful business is a good idea and hard work. However, to continue to run a booming business needs continuous efforts. One such area that needs attention is inventory management. Proper inventory management is essential to the health of the business. Careful and smart inventory management lower inventory carrying costs and minimize the amount of stock that sits in the warehouses. Many companies embrace the 80/20 inventory rule to manage their MRO inventory. If you are wondering what the 80/20 inventory rule is and how you can implement it in your facility, you are on the right page. 

As one of the leading e-marketplaces for genuine and unused MRO spares, we share with you useful insights on the 80/20 inventory rule: 

It is based on the Pareto principle:  According to the Pareto principle, 80% of consequences come from 20% of causes. In other words, 80% of results come from 20% of efforts. In terms of inventory, this rule means that companies earn roughly 80% of their profits from 20% of their products. By identifying the most profitable parts of your inventory, you can focus more on them. You keep the identify the least profitable parts of your inventory and keep their quantities at a minimum. 

Categorize inventory: For you to implement the 80/20 inventory rule in your facility, it is important to categorize the inventory into categories based on the  profits they get. Many MNCs use the ABC Analysis to categorize items. 

• Item A: These products bring in 80% of the profits. 
• Item B: These contribute to 25% of your revenue. 
• Item C – They are not high-value items and generate only 5% of the profits. 

The need to implement the 80/20 inventory rule: When you have an inventory management system in place, the production schedule does not go haywire in the absence of certain products. The whole idea of having an inventory management system in place is to ensure that the right inventory is available at the right time. 

Advantages of the 80/20 inventory rule: One of the main advantages of the 80/20 rule allows businesses to better utilize their resources, efforts and time. Some of the other benefits are: 

• Track of capital investment: It helps businesses to maintain control over the costly items. 
• Better record keeping: It provides a system to keep track of all the inventory. 
• System control of inventories: The 80/20 inventory rule helps to accurately calculate the stock turnover ratio. 
• Warehouse expenses: Warehouse spaces come at a premium and by implementing the 80/20 inventory rule, the storage expenses can be reduced. 

A very important part of inventory management is buying MRP spares at discounted prices.  You can buy genuine and unused MRO spares at discounted on mjvaluemart, a multi-vendor e-marketplace. On the e-markeplace, you will find different categories of MRO spares such as valves, fasteners, gearboxes and ball bearings. 

Looking for unused and genuine valves online? 

Valve uses include regulating the flow of fluid, semi-fluid and gas. Different types of valves and their uses vary from one industry to another. You will find different types of valves on the platform at discounted prices. 

To become a registered buyer on mjvaluemart, click here.