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Sunday, August 02, 2009

Pareto Principle of Food Stock Control


Inventory management is time consuming and takes our focus away from building sales and providing a great customer experience.

The Pareto Principal states that 80% of the effects come from 20% of the causes. In other words: 20% of your stock items make up %80 of your stock value. By focusing on the high value 20% we can minimize the time spent on stock control, but ensure this time is spent on the things that really matter.

To implement the Parento Principle go through a full stock take and select the high value stock items that you want to focus on. You can then summarize the remaining items into a nominal cost. Next time you do a stock take you only need to count the high value items and use the previously calculated nominal value to represent the other items. You can still calculate all the key metrics like Cost of Goods and Gross Profit, but minimize the time spent on stock control.

Paul Clarke (@foodmargin)

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