How much overhead, labor and materials are used by the 80% of the parts that represent 20% of your sales (hint: it is much more than 20% of ...()TableofContentshide1)Howtodoan80/20analysisinExcel;Pareto’sLawtoanalyzeyourbusiness2)Howtocalculate80-20ruleinMicrosoftExcelwithaSKUrationalizationtemplate3)Step-by-stepSKUanalysis4)SKUrationalizationandthePareto80-20rule5)80-20ruleexamplesinExcel6)HowtouseyourParetochartandthe80-20ruleinExcel7)Conclusiononusing80-20,ParetoandExceltomanageyourbusiness8)ParetoprincipleineverydaylifeLearnhowtodoan80/20analysisinExcel,andusethe80-20principletomanageyourbusiness,reducecostsandincreaseyourprofits.You’veprobablyheardaboutPareto’sLaworthe80-20principle.Although…mostpeopleonlyunderstand20%ofit,80%ofthetime(rimshot!).Thissimpleprinciplecanbeusedtoincreasesales,profitsandincreaseeffectivenessofyourmarketing,andiseasytouse.VilfredoParetowasanItalianeconomistandsociologistbornin1848.Hisbigdiscoveryin1897,“Pareto’sLaw,”claimedthatinanysociety,20%ofthepeoplewouldearn80%oftheincome.Pareto’sobservationsarenowusuallyreferredtoaseithertheParetoPrinciple,Pareto’sLaworsimplythe80/20principle.TheyhavesincebeenusedinareasthatParetocouldneverhaveimagined.Oneyoulearnhowtodo80-20analysisinExcelyoumightbeamazed.ItissurprisinghowoftenPareto’sLawappearsinbusinesswelloveracenturylater.Let’sjumprightinandlearnhowtodoan80/20analysisinExcel!Howtodoan80/20analysisinExcel;Pareto’sLawtoanalyzeyourbusinessPareto’sLawisoldnewstoalotofindustrialengineersandpeopleinthequalityprofessionwhodealwithprocessimprovement.Itcanalsobeusedtoanalyzeotherthingsinyourbusiness.Ifyou’reamanufactureryoucanusePareto’sLawtoevaluatewhethertoaddto,oreliminatepartof,yourproductline.Youcanalsoevaluateorprioritizeyourcustomers.Ifyou’readistributor,youcanuseittoanalyzeyourstockinginventory(andtodeterminehowmanyofthoseSKUsthatmanufacturersclaimare“AAmovers”reallyare).Jobbersandretailbusinessescanuseitasatooltoallocatefloorandshelfspace.Manufacturer’srepscanuseittoeasilyseewheretofocusti