The principle was suggested by management consultant Joseph Juran and named after the Italian economist, Vilfredo Pareto. Pareto discovered that 80% of the land in England was owned by 20% of the population. The 80:20 ratio is an approximation and sometimes the ratio may be closer to 80:30 or 70:25.
The principle is meant to exemplify the large disparity between effort and result, not specifically the 80:20 ratio.
When examining picks, on average, 80% of the throughput will come from 20% of the SKUs. These are the SKUs that are NOT ideal for carton flow. Often these high throughput SKUs are best picked from pallets.
The optimal carton flow SKUs are within the remaining 80%, which also includes SKU’s that are so slow-moving, that basic shelving is the best storage medium, based on both cost and storage density. Would you be surprised to hear that the SKU’s targeted for carton flow are the 20% of this remaining lion’s share?
Once the proper SKUs and storage mediums are identified, a warehouse layout can be optimized. An aisle of pallet pick bays of the fastest moving SKUs is fairly typical, as is an aisle of carton flow bays or a dedicated pick module. The downside is that a picker must walk BOTH aisles in order to pick a complete order.
Again, 20% of a warehouse’s SKUs account for 80% of their picks. However, these are not necessarily the same 20% that account for the throughput. The beauty of the Pareto Bay is, it doesn’t matter.
Storing pallets on the floor with one level of carton flow above allows a warehouse to increase its SKU density per bay by 500% on average. By combining these two storage mediums into one aisle, the pick path for these Pareto SKUs can be shortened by half.