Use the 80/20 rule to tighten your focus, free up cash, and boost service to your best-selling lines.
Ask any seasoned distributor in the glass, ceramics, or refractories business and they’ll tell you: not all SKUs are created equal. A small percentage of your product catalog likely accounts for the lion’s share of your revenue. But how often do you quantify it?
The 80/20 rule—also known as the Pareto Principle—is a powerful tool for strategic inventory and customer alignment. In practical terms, it means:
20% of your SKUs generate 80% of your revenue
20% of your clients generate 80% of your order volume
20% of your suppliers drive 80% of your fill rate reliability
So why do most distributors spend equal energy across the full 100%?
Let’s start with the numbers. A Calgary-based refractory distributor ran a SKU-level revenue analysis over 24 months. Out of 2,000 active SKUs, just 390 generated 82% of sales. These were primarily dense firebricks, insulating castables, ceramic fiber modules, and burner blocks for cement and petrochemical plants. The remaining 1,610 SKUs—many of which had moved fewer than five units per year—accounted for the balance.
This prompted a strategic pivot:
Deeper stock levels on the core 20%, improving fulfillment speed
Better supplier terms via volume bundling on those key items
Retirement of low-contribution SKUs after confirming no mission-critical client dependency
Similarly, a Boston-based glass distributor found that standard sizes of clear float glass, tempered storefront panels, and insulated low-E units comprised their top 20%. By focusing resources on ensuring availability, speeding delivery, and negotiating better freight terms for these items, they increased overall margins by 4%—without growing the catalog or adding complexity.
So how can your team identify the 20% that matters most?
Run a Sales-Per-SKU Report
Use your ERP to sort all active SKUs by total sales volume over the last 12–24 months. Flag anything that contributes to the top 80%.
Cross-Reference Margin
High-volume isn’t enough. Filter out any SKUs with sub-par margins unless they are strategically essential or tied to high-value clients.
Overlay Client Segmentation
Which clients are driving the purchases of your top 20%? These accounts should get preferred service, inventory priority, and faster quotes.
Monitor for Drift
Your 20% can shift—new projects, seasonality, or supply chain issues can push new SKUs into focus. Quarterly reviews help keep the list fresh.
Train Sales to Focus on the Core
Sales reps often chase the obscure, but most deals close in the familiar. Training them to lead with the core 20% builds confidence and closes faster.
:
In distribution, more isn’t always better. By identifying and doubling down on the 20% of SKUs that drive 80% of your revenue, you sharpen your operations, boost profitability, and improve customer service. It’s not just an inventory tactic—it’s a business discipline. And for glass, ceramics, and refractory distributors trying to do more with less, it’s a formula worth revisiting every quarter.
