Which one of the following uses Pareto principle? Group of answer choices ABC classification model Single-period inventory model Fixed-order inventory model Price-break model Fixed-time inventory model
Question
Which one of the following uses Pareto principle? Group of answer choices
ABC classification model
Single-period inventory model
Fixed-order inventory model
Price-break model
Fixed-time inventory model
Solution
The Pareto principle, also known as the 80/20 rule, is used in the ABC classification model. This model classifies inventory into three categories, A, B, and C, in terms of importance and value. 'A' items are considered the most important, typically making up 20% of the inventory but accounting for 80% of the value, which is where the Pareto principle comes into play. 'B' items are less important, and 'C' items are the least important. This model is used to manage and control inventory effectively.
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