Pareto Chart | Diagram | Pareto Principles

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

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:

Select the problem.
Collection of data.
Sort data & calculate the cumulative percentage.
Draw the axes, bars, cumulative percentage line, and labeling.
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 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.

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:

1. Flow Chart | Process Flow Diagram | Types & Examples

2. Cause & Effect Diagram (Fishbone or Ishikawa)

3. Check Sheet | Different Types & Examples

4. Histogram | Different Types of Patterns & Examples

5. 7 QC Tools for Process Improvement

6. Scatter Diagram | Types & Examples

7. Control Chart | Types & Examples

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