| What is it? |
A bar
graph used to arrange information in such a way that priorities for process improvement
can be established. Click here for a sample.
The 80-20 theory was first developed in 1906, by Italian economist, Vilfredo Pareto, who
observed an unequal distribution of wealth and power in a relatively small proportion of
the total population. Joseph M. Juran is credited with adapting Pareto's economic
observations to business applications. |
| Why is it
important? |
| Pareto
charts provide a tool for visualising the Pareto principle, which states that a small set
of problems (the "vital few") affecting a common outcome tend to occur much more
frequently than the remainder (the "useful many"). A Pareto chart can be used to
decide which subset of problems should be solved first, or which problems deserve the most
attention. Pareto charts are often constructed to provide a before-and-after comparison of
the effect of control or quality improvement measures. |
| When to use it? |
| The
Pareto Chart is used to illustrate occurrences of problems or defects in a descending
order. It is used for making decisions at critical points in different processes, which
means it can be used both during the development process as well as when products are in
use, e.g. customer complaints. |
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| How to use it? |
Step by step process to address an issue:
| 1 |
List all
elements of interest |
| 2 |
Measure the
elements, using same unit of measurement for each element. |
| 3 |
Order the
elements according to their measure |
| 4 |
Calculate
the percentage for each element out of the total measurement |
| 5 |
Accumulate
the percentage from top to bottom to equal 100%. |
| 6 |
Create a
bar and line graph, line representing cumulative percentage. |
| 7 |
Work on the
most important element (or elements) first. |
|
Hints
Pareto charts are a key improvement tool because they help us identify patterns and
potential causes of a problem. One trick often overlooked is to create several Pareto
charts out of the same set of data - this can help you quickly scan a number of factors
that might contribute to a problem and focus on those with the greatest potential payback
for your efforts. Pareto Analysis is also used in inventory management through an approach
called "ABC
Classification". The ABC classification system is grouping items by annual sales
volume. This helps identify the small number of items that will account for most of the
sales volume and that are the most important ones to control for effective inventory
management. |
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| Food for Thought ! |
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