80/20 Analytics
Powerful analytics in 3 steps
80/20 Analytics has 3 analytical steps representing a powerful combination of common sense and the laws of nature:
Get an overview
Gain a factual overview of your supply chain with segmentation techniques
Analyze your supply chain
Identify and analyze your high-impact products, customers and suppliers
Nurture core business
Nurture your high-impact business and reduce costs at low-impact business
Step 1: Get an overview
Have you ever found yourself lost in a city, an airport or even at a hotel? Almost everyone remembers losing orientation and ending up bewildered. You waste time and sometime money as well.
Professionals who manage a complex supply chain can easily wind up in the same situation. Situations may vary, but the root cause is usually the same: information overload.
Complexity is the ultimate driver of information overload.
Imagine the ideal situation of total simplicity. You have one customer buying a single product. Components are delivered by your only supplier. You are successful in the eyes of the customer. Full attention - full service - optimal performance. Simple.
Then add thousands of customers, products and suppliers to the scenario. You have now blown away simplicity and introduced complexity.
The optimal performance of any operating unit can be killed by growing complexity – unless you maintain a clear overview when things move fast.
Gain a fact-based overview of your supply chain
Step 2: Analyze your supply chain
All customers should be treated like kings, but some are more important to your business than others. Every product in your portfolio are appreciated by your customers, but the greatest part represent low revenue stream. And although all your suppliers may be unique, some of them are critical and others not. It’s basically the cause and effect of your business.
Many great people have spoken about the nature of cause and effect. One well-known innovator was Vilfredo Pareto – an Italian engineer and economist born in 1848.
Pareto’s world famous observation: 80% of the land is owned by 20% of the population
The observation has been adopted by the world of business and applied to management theory.
Pareto’s rule translated to business management says: 80% of the revenue is represented by 20% of your customers, 80% of the cost value is represented by 20% of your products.
Get to the core of your business by using analytical techniques inspired by 80/20.
Analyze and identify your high-impact business
Step 3: Nurture core business
Supporting supply chain complexity can be expensive, but nevertheless profitable when done right. Allowing unnecessary complexity will slow you down and create loss.
Define different levels of nurturing for different segments of your products, customers and suppliers. Avoid the risky "peanut butter approach" - spreading the same tactics to all aspects of the business.
Spend and spread your resources wisely by defining clear targets to each segment. From high-impact business to low-impact business. Focus on the things that really matter to make your business prosper.
Define policies to nurture high-impact business