Pareto Chart  Diagram  Pareto Principles  Excel Template

What is Pareto Chart in 7 QC Tools?

→ It was invented by Mr. Vilfredo_Pareto and it is a combination of a bar graph and a line graph. It helps us to prioritization.
→ In this diagram the order of the largest number of occurrences by item or by classes and the cumulative sum total are available.
→ The bar graph shows the number of defects in descending order and the line graph shows the cumulative percentage of the defect.
→ It is the most popular prioritization tool out of 7 QC Tools for Process Improvement.


What is the Pareto Chart used for?

  • This tool is used for Prioritization
  • It is used to calculate the potential impact of the things
  • It is used for identifying the vital few and trivial many.

History:

→ Vilfredo Pareto was an Italian engineer, sociologist, economist, political scientist, and philosopher.
→ He shows an observation that is: "80% of the land in Italy was owned by about 20% of the population."
→ He introduced the concept of efficiency and helped to develop the field of microeconomics.
→ The Pareto principle was named after him.
→ He also contributed to the fields of sociology and mathematics.




What is the Pareto Principle?

→ It is also known as the 80/20 rule, the law of the vital few or the principle of factor sparsity
→ 80% of the Problems come from 20% of the causes.
→ 80% of the Output comes from 20% of the Input.
→ It Distinguishes between Vital Few from Trivial Many.
→ 80% of the Results come from 20% of the effort

Pareto Principle

How to Do Pareto Chart Analysis?

→ As mentioned in the above picture we can analyze the chart based on the 80/20 rules such as the 20% causes that are responsible for 80% of the problems. Similarly, by applying the 20% efforts we can get rid of 80% of the problems.



How do I make a Pareto chart?

➝ Refer below five steps for Making a Pareto_Chart:
  1. Select the problem.
  2. Collection of data.
  3. Sort data & calculate the cumulative percentage.
  4. Draw the axes, bars, cumulative percentage line, and labeling.
  5. Identify Priority and plan further action.

Step 1. Select the Problem:

➝ Select the problem for investigation.
➝ Determine the data collection method and period of collection.
➝ Design a separate Check Sheet if necessary.
➝ E.g.: Defect analysis.



Step 2. Collection of data:

➝ The second step is data collection for the graph after the selection of the problem

Step 3. Sort data & calculate the cumulative percentage:

➝ The third step is to sort out data and find the cumulative percentage.
➝ Refer the below picture for better understanding and clarification

Step 2 and 3



Step 4. Draw the axes, bars, cumulative percentage line, and labeling:

➝ Now, we have to draw the axes, bars, cumulative percentage line and give title and labeling to the_chart
➝ See the below picture in which all the above things are mentioned.

Construction of  Pareto_Chart

Step 5: Identify Priority and plan further action:

→ Now we analyze the chart and identify Vital Few problems from the Trivial Many by using 80:20 principle and plan further action:
→ Let's say in our example we are taking defect D, E, F, and defect A for further action because the contribution of these defects is almost around 81%. it is as per 80:20 Rule.
→ It is not mandatory to take defects up to 80% we can take only the first two defects which contribute around 65% problem.
→ Now we will take action on these defects by finding the root cause with the help of any root cause analysis method (i.e. Cause and Effect Diagram or 5 Why analysis) of defect generation and implement preventive action on it.



👉 Pareto Chart Excel Template Download


 | Benefits

→ We can easily distinguish between Vital Few and Trivial Many.
→ It displays the relative importance of causes of the problem.
→ It helps the team to focus on those causes that will have the greatest impact when solved.
→ By using 20% of resources we can solve 80% of problems.
→ We can easily understand the impact of the defect on our production
→ It is very easy for analysis by this tool and also this tool is very useful in the various project of six sigma, QCC, and 7QC Tools.

👉 Also Read:
      2. Cause & Effect Diagram (Fishbone or Ishikawa)



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