Certified Supply Chain Professional (CSCP) Practice Exam

What does the Pareto principle suggest?

1. 80% of results come from 20% of efforts

2. 20% of customers will account for 80% of value

3. 80% of products will yield no profit

4. 20% of companies dominate the market

The correct answer is: 20% of customers will account for 80% of value

The Pareto principle, often referred to as the 80/20 rule, suggests that a small percentage of causes or efforts are responsible for the majority of the outcomes or results. While your choice aligns with a specific interpretation of this principle, the core idea is more broadly applicable. The correct answer highlights that 80% of results come from 20% of efforts, which encapsulates the essence of the Pareto principle. This means that optimizing focus on those vital few factors can lead to substantial gains, emphasizing efficiency and resource allocation in various fields, including supply chain management. The other interpretations refer to specific applications of the Pareto principle. For instance, stating that 20% of customers account for 80% of value reflects its application in sales and marketing. However, the principle itself is not exclusively tied to customer value but rather asserts a general trend found across different scenarios. By aligning efforts with the critical few actions that provide the most significant returns, businesses can enhance productivity and effectiveness.