Pareto

What is a Pareto Chart

Based on the Pareto principle, also known as the 80/20 rule

Pareto Principle: Vilfredo Pareto observed that 80% of the peas in his garden came from 20% of his pea plants and 

80% of Italy's land was owned by 20% of the people. 

So the principle - 80% of effects come from 20% of causes

How does that help us - if we can find the 20% causes and remove/reduce their occurrence then we remove 80% of errors

 

Pareto Chart: presents the chosen areas sorted by relative frequency, also cumulative percentage line on the Z-axis ( see example below)

 

When to use a Pareto Diagram

  • To concentrate on the problems/areas that offer the best potential for improvement

  • To prioritize

  • Use the pareto chart to visually present areas that need improvement

Variations
  • Breakdown the tallest bar and make a linked pareto of its causes 

  • Similarly you could use multiple pareto's and present side by side to compare - e.g. by region, by process (Note parameters should be same) Helps find solutions as well , e.g. if grammar is problem is one region and not in another - what has the region done differently

How to make a Pareto diagram

  • Area: Decide an area you want to study - it should be able to give some data

  • Category: Choose the causes, problems, categories that you will use to group items eg. count of errors in process steps, failure types,  error types, reasons for rejection...

  • Unit of measure: Choose the appropriate unit of measure. eg if you are trying to save costs - then total expense on an item would be better than the count of items. 

  • Period: choose the period that will give you sufficient data, day, week, month  

  • Collect data: or use the data available - with categories

  • Tabulate: use the table in the template ( shown in the example below )

  • Once done, format the graph is required.

  • Interpretation: the tallest bar points to the largest contributor. You can also see that where the cumulative % line, comes near 80 %, in this case, the first 4 parameters contribute to the 78.3% of errors 

  • Is it always 80: 20, No .... we are just trying to prioritize and find the biggest impact areas. 

  • In the shown examples case it is 78.3: 40 ( 4 of 10 parameters)

  • Start with the biggest one and keep on

Example & Excel Template  - Pareto