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The 80:20 Rule: Optimize Data and Analytics for Better Supply Chain Management

As e-commerce continues to grow across all markets, retailers in particular have faced many challenges in optimizing their planning and execution processes. What is the best way to decide which products to restock? How should retailers decide the types of products to create next?  

According to a recent article in Forbes, the retail industry’s adaptation of The Pareto Principle helps restructure decision-making standards. By shifting key internal processes, retailers can resolve issues  between product creation and consumption.  

Applying the 80:20 Rule to Retail

Traditionally, in retail,  20% of decisions are based on data, whereas 80% focus on gut feel. The decisions determined by this approach relate to key aspects of supply-chain planning and distribution, such as product ranges, personalized marketing, up-selling, cross-selling, restocking and more.

According to the article, Amazon has shifted its own approach to make 80% of its decisions across all categories based on data, and only 20% on gut feel. Amazon uses this formula to gain a better understanding of what works well and what doesn’t, through proper data analysis.

This data provides useful insights into logistics and supply chain management. Instead of choosing which products to restock based on gut-feel, Amazon uses data to make more accurate decisions that breed better results.

Redefining Retail: What Data Can Show Retailers  

The apparel and footwear industries are becoming increasingly fueled by consumer-centric data. Retailers who make this shift from gut-feel to data can be confident they have the right target consumer in mind and understand key insights when making decisions.

With data analysis, a retailer may discover that a specific product is consistently returned and identify production or style flaws that need to be fixed before restocking the item. Data also enables retailers to improve consistencies across their own sizes and gain a better understanding of the style details their consumers prefer.

Intelligent, data-driven decisions are made possible with access to new, unparalleled insights. Increased data about products and consumers increases the ability to provide consumers with personalized shopping experiences.

Brands that restructure the 80:20 model can ensure data drives their supply chain management processes and decisions. By making this shift, data from consumer behaviors and transactions can be used proactively in future processes.

For more information about how you can obtain data about consumer demographics, returns behavior and product details, in order to drive better business decisions, click here.