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80-20 Pareto Principle

The Pareto Principle describes the 80-20 rule for manufacturing processes. Manufacturers can apply the 80-20 rule to every process, including make-to-order, make-to-stock, engineer-to-order, assemble-to-order, and more. Applying the 80-20 rule to the 5 M's of manufacturing will maximize your company's success and profitability. Learn more about how the 80-20 rule applies to several areas in manufacturing, including labor, production processes, materials, and more.


Twenty percent of labor contributes 80% of your company's success. So, leaders' focus must be on getting all labor to perform as competently or efficiently as those high-level performers.

This strategy could mean training to bring skillsets up to par or managing your team better, so all employees know your expectations. Ensure you are holding your team accountable to perform their assigned tasks on time and to the level of quality you expect.

It may be required to implement a better hiring procedure to ensure the labor your company hires has the skills or ability to learn and perform at the expected level.

Methods or Processes

The 80-20 engineering rule suggests that 20% of your methods and processes are solid and robust, while 80% of them may not be providing the level of results you expect or require. If this is the case, your focus might turn toward analyzing the methods and processes used in your company and finding out which procedures the company needs to overhaul or modify to allow a higher percentage of success in your business.

Machines or Equipment

According to the 80-20 rule, 20% of your machines are responsible for 80% of the value-added content of producing your product. Another possibility is that 20% of your machines make 80% of your overall scrap.

In both situations, your goal should be to standardize your machines or equipment as much as possible to remove any variation in quality, throughput, uptime, floor space, and other key performance indicators. Monitoring and tracking each of your machines' overall performance will allow you to understand better which machines are contributing positively or negatively. Once this is known, your action plan to solve machine issues will be better guided and effective in making the improvements necessary for continuous improvement.

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Twenty percent of your material accounts for 80% of the cost of your product. Or that 20% of your material causes 80% of your quality defect issues. Another might be that 20% of your material costs 80% of the overall shipping costs for inbound products.

In all of these examples, understanding which materials fall into an 80-20 category will allow you to investigate further what you can do to improve your overall variances in your raw materials.


The 80-20 rule suggests that 20% of your products contribute 80% of your profits, sales, or growth. Whatever it is, the goal would be to find ways to increase the sales, production, and distribution of your top money-making products.

Learn how the Pareto principle can be applied to your custom automation solution


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