Pareto Analysis

Separating the “Vital Few” from the “Trivial Many”

Introduction “Pareto diagrams help tell us where to concentrate our

limited resources to best effect.”

• Named after Vilfredo Pareto, a nineteenth century Italian economist.

• Dr. Joe M. Juran, coined the term “Pareto principle” in the late 40s.– Juran called the significant items the “vital few.” – The rest are the “trivial many.”

• Graphs we call Pareto diagrams help separate the vital few from the trivial many.

Function of a Pareto Diagram• A Pareto diagram presents problems in graphic form with the

biggest problem on the far left and the others arranged in descending order.

• It is easy to see, for example– 80 percent of sales are being made by 20 percent of the

salespeople, or– 70 percent of the clerical errors are coming from 30 percent of the

clerical workforce, or – The dollar loss from rejects is being generated by just a small

number of machines.• They remind us to stick with “first things first.”

• A Pareto diagram is useful when you’re facing a big pile of problems: – Which is the worst problem?– Which is the Biggest contributor to the problem?– Which happens most frequently?

• Pareto diagrams also are used:– To analyze problems from a new perspective or vantage point– To focus everyone on the problem-factor priorities– For improving communications– For comparing changes in the data over time– To see the cumulative-effect of the problems

The Pareto Diagram – How it is used.

Example Pareto Diagram – what do you see?

• Total number of errors is 60. • Class A errors account for 36 of the errors, or 60 percent of all errors

– (36 / 60 = 0.6 x 100 = 60%). • Which classes of errors account for 80 percent of the total?

How to build Pareto Diagrams • Decide what the time period should be for collecting data.

– Hours, days, weeks, months?• Decide on the classifications for the data.

– Kinds of errors? Shift? Department? Operator?• Design a check sheet for collecting the data.

– Your check sheet should allow you to rearrange information in different ways in case the first way doesn’t work out.

• Use your check sheet to record the data you collect.• Compute totals and percentages.

How to build Pareto DiagramsGrab a sheet of graph paper and build your Pareto diagram! • First, draw the vertical and horizontal lines, • Then the vertical (volume) scale.

A Sample ProblemThe checklist below is now partially completed. Your task, now that you’re the expert Pareto Analyst, is to complete the checklist, and then to construct your Pareto diagram. Don’t forget to plot the cum line!

Envelope Credits Check Sheet

Class DefectCredit

Frequency DollarsTotal

DollarsCum

%

A Distortion 11 51, 2011, 201, 70, 523, 460, 411, 921, 300, 718, 199

B Paper shade 2 371, 500

C Adhesives 11 6, 23, 7, 41, 16, 90, 16, 4, 5, 10, 51

D Bands 4 25, 85, 46, 20

E Flap & print 3 31, 9, 54

F Window position 1 55

G Mix-up 1 40