The 80-20 Rule

As the first year of the new millennium begins, it is appropriate for retail jewelers and jewelry manufacturers to remember some of the things we've learned in the century just concluded. One such practical tool for jewelers on both sides of the counter is the "80-20 rule." I believe it was an industrial engineer who developed the 80-20 theory-that is, 80% of a business's sales come from 20% of the product offered. By itself, the 80-20 rule is interesting and helpful whether you are a retailer, wholesaler, or manufacturer. However, comparing those 80-20 products with your inventory investment is what really pays off in profitability analysis. Every business needs to capture its sales data to measure where its business originates and to compare these data with prior years' activity to measure changes. It's a simple concept, but one that can be overlooked as we become more sophisticated.

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