In 1906, the Italian economist, Vilfredo Pareto, developed a mathematical formula which described the distribution of wealth in his country, discovering that 80% of the wealth belonged to 20% of the population. In later years, many other specialists observed a similar phenomenon in many other areas. In general, 20% of something is responsible for 80% of the results and this phenomenon became popular with the name "Pareto Principle" or "the 80-20 rule".
The 80-20 rule is currently applied in many different fields and is used as a starting point in warehouse management and optimisation.
In general terms, it is assumed that 20% of product references take up 80% of the warehouse space and 80% of the stock comes from 20% of the suppliers.
It is also estimated that 80% of the revenue come from 20% of the clients.
The application of this rule centres upon the fact that once this proportion has been assumed, efforts are focussed on optimising the factors which represent the most important 20%, since their impact will affect 80% of the results.
This can help in deciding, for example, which product references to store on metal racks with lower rotation level systems, such as the push-back pallet racking or the compact or drive-in pallet racking, and how to distribute the references on the metal racks with conventional pallet racking, thinking about which products have a more frequent circulation.