Beer Portfolio Management: 80/20 Analysis
80/20 analysis can be used in many areas of your beer business to identify opportunities to increase sales or decrease costs.
The 80/20 concept states that a small amount of “inputs” or “causes” create a large amount of “outputs” or “consequences”.
For beer wholesalers, 80% of sales come from 20% of customers, and 20% of your suppliers make up 80% of sales.
In fact, when I’ve run this analysis the result is even more skewed: 80% of sales come from the top 11% suppliers.
This begs the question: Why are we carrying so many suppliers that contribute so little to sales, and so much to costs?
Run an 80/20 analysis on your inventory portfolio and see what you come up with.
Below is an example of what this 80/20 analysis looks like:
The 80/20 analysis helps to identify which suppliers deserve to be in the portfolio and which are dead weight.
Run this analysis alongside the calculation of total inventory carrying costs. Cut some dead weight, and reduce
Do this next:
- Download the 80-20 Analysis Template
- Learn about our financial education programs for beer wholesalers
