GPS has developed an Inventory Analysis Calculator that will immediately focus your employees and save you a lot of time. The Calculator is based on the Pareto Principle (80/20 rule) which still applies today, even with all of the sophisticated systems and formulas that are now available. It will divide your total inventory into 20% increments to help you see the impact each group has on your total operation.
The top 40% of inventory accounts for almost 95% of sales! Yet, the bottom 60% of inventory accounts for ONLY 5.5% of sales! With inventory carrying costs averaging 25% per year, it costs a lot to carry this bottom 60% of inventory – just to get 5.5% sales