Pareto Principle

A management tool based on writings of Vilfredo Pareto, an Italian economist. The principle is that most of the occurrences of any happening are caused by a small percentage of the population. Applied to purchasing management it means that the largest percentage of cost reductions can be obtained from a small percentage of the items purchased or from a small percentage of the number of suppliers used. Erroneously sometimes referred to as the 80-20 rule.


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