A Pareto chart is an analytical tool which can be used for both Quantitative and Qualitative data. It is based on Pareto analysis developed by Vilfredo Pareto who coined it as an “80/20 rule,” which postulates that roughly speaking, 20 percent of the people own 80 percent of the wealth. Or, in quality terms, 80 percent of the losses come from 20 percent of the causes.
Pareto chart leads to increased productivity by focusing your attention on the topics/resources that help to achieve maximum efficiency. You can also focus to remove those 20% of the items are responsible for 80% of the unproductivity. With productivity comes profitability in which you focus on those 20% of the items that are responsible for more profits thus allowing you to focus on profit-generating items. This also helps to identify the core problems and bottlenecks of problems and also improve customer services.
The Pareto principle could be applied to almost anything in our daily life-
20% of your present activity determines 80% of your future
80% of customer complaints arise from 20% of your products and services.
80% of the delays could be managed by reviewing 20% of the tasks.
20% of your time is responsible for 80% of the result.
20% of your products and services account for 80% of your profit.
20% of your sales force produces 80% of your company revenues.
How to create the Pareto chart?
With excel-
There are many explanations for drawing a Pareto chart and steps. We will not be going around steps to draw the Pareto chart as this will take a lot of time. Instead, download this Pareto chart graph from here and start drawing the chart entering only causes and frequency.
In the excel template enter the cause of the problem/items and frequency in green boxes. This graph performs the Pareto analysis for 15 items if you want to perform analysis for a lesser number of items please delete unwanted numbers of green rows, scroll down and also delete an unwanted number of red rows. While editing please only use the green space. Do not change anything in the red and yellow space. After you graph is generated, copy and paste the chart on your project!
Download free excel template for pareto chart
Example:
From the cause and effect analysis (matrix chart), the following data with associated scores were seen for the reasons that could delay the takt time (here, the time is taken for customer’s check out). We are interested in calculating which are the top solutions to the problems that could solve 80% of the Takt time problem. We have a data like this-
Item # | Process Input | Total Score |
1 | Total number of retail operators | 220 |
2 | Experience/ knowledge of operators | 106 |
3 | Computerized system | 220 |
4 | Availability of the space | 32 |
5 | Size of the retail | 22 |
6 | Size of the basket | 62 |
7 | Total number of checking zones | 220 |
8 | Elimination of the customer traffic disturbances | 66 |
9 | Quality of the computerized system | 120 |
10 | Usage of cards and other ways for payment | 220 |
After you enter the data you can see a chart like this-
With Minitab
Let’s learn to make Pareto chart with this example. Here are causes of the problem and the associated frequency are listed,
Causes | frequency |
A | 1 |
B | 3 |
C | 5 |
D | 7 |
E | 9 |
F | 8 |
G | 6 |
H | 5 |
I | 3 |
J | 1 |
Open your Minitab program and go to Stat> Quality Tools>and Pareto chart
A window for the Pareto chart is displayed. Select the column for defects (causes) in this case and frequency.
When you click OK you can observe the Pareto analysis as shown here:
Right click the mouse button and select crosshair. Move the crosshair to the point where the line graph meets the 80% mark. We see that causes E, F, D, G, and C are responsible for 80% of the problem. (Though these causes don’t count to be 20%). This means that solving these 4 items or causes will help you to solve 80% of the problem.
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