The 80/20 rule, also known as the Pareto Principle, in inventory management suggests that roughly 80% of your results come from 20% of your inventory items. In practice, this means that a small percentage of SKUs often account for the majority of sales or operational impact.
Recognizing which SKUs drive most of your business helps operators focus their time and working capital on the products that matter most.
Without clear visibility into this split, teams often spend equal effort tracking low-value or slow-moving items. That not only clutters reports but can also distort demand forecasts and restocking decisions.
How to Apply the 80/20 Rule in Inventory Management
To put the 80/20 rule into action:
- Analyze sales or order data to identify which SKUs contribute most to revenue or volume.
- Segment your inventory into “A” (top 20%), “B,” and “C” tiers based on performance.
- Prioritize the A-tier for forecasting, replenishment, and monitoring.
- Automate tracking to ensure those key SKUs always have real-time visibility.
- Reassess quarterly as demand patterns change throughout the year.
This method helps teams focus operational energy on what truly drives results.
How It’s Done With Parabola
With Parabola, operators can automatically identify and monitor their top-performing SKUs.
You can connect sales, ERP, and warehouse data, use “Group By” or “Sort Rows” steps to rank items by volume or revenue, and dynamically tag the top 20% across systems.
Flows can run on a schedule to keep your prioritization live — so when sales trends shift, your inventory strategy adjusts automatically.