The Pareto Chart, which is a member the 7 QC Tools, is a valuable tool in the Measure phase of Six Sigma. Vilfredo Pareto Pareto, an economist from 19th century, is the name of the Pareto Chart. He believed that only a small portion of the population owns large amounts of wealth. This principle is applicable to quality problems and is discussed in Lean Six Sigma courses. Pareto analysis is a process of ranking potential opportunities to determine which should be pursued. Six Sigma Certified Green Belts also call it “separating the vital few” or “separating the trivial many”.
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What is a Pareto Chart and how does it work?
According to the Lean training course, a Pareto Chart is a series or bars whose heights reflect the frequency and impact of problems. The bars are arranged from left to right in descending order by their height. The taller bars on the left indicate that the categories are more important than the ones on the right. This bar chart is used for separating the “vital few”, and the “trivial many”.
The Pareto chart can be used to prioritize those contributors who have the greatest impact on a problem or represent the largest areas for opportunity. These diagrams illustrate the principle of 80/20. It states that 80% is due to 20% of the causes. Take this example:
20% of customers account for 80% of the revenue.
Or, 80% of customers contribute only 20% to the revenue.
These are the only causes of customer complaints (20%) and 80% of them come from these few sources.
These few areas (20%) are the most problematic and account for 80% of the maintenance and repair time.
The 80:20 rule basically means that focusing attention on the important few will yield greater gains than the trivial many. The Pareto chart can be used to help you focus your attention on priorities and make decisions. It is a great communication tool because it presents the data in a simple, easy-to-read bar chart. This chart allows you to analyze and determine the most significant contributors to an event’s frequency or occurrences.
Why use a Pareto Chart Tableau
A Pareto Chart can be used in economic terms for many benefits. A Pareto Chart
Reduce a large problem into smaller pieces
Identifies the most important factors and shows where to focus your efforts.
This allows for a better use of limited resources.
We can identify the most significant problems and the most likely problems to help us focus our improvement efforts. We can also arrange data according to priority/importance and determine which problems are the most important using data, rather than perception or gut feeling.
The following questions can be answered by a Pareto chart:
What are the most pressing issues facing your team or business?
What 20% of the sources are causing 80% of the problems
To make the most progress, where should we focus our efforts?
Illustration of the Pareto Chart template
Let’s take a look at a Pareto chart illustration. The first table shows the raw data. It contains two columns, which are defect type (or count of defects).
To draw the Pareto charts, we first need to organize the raw data. The data have been arranged in descending ordering.
We have also calculated the sum of all the ‘Count of defects’ columns. We have divided each observation in the Count of Defects column by the percentage column. This gives us the total of 441.
To calculate 53.29%, we have divided 235 by 441. We then multiplied the sum with 100.
We have calculated cumulative percentages for each observation in the ‘Percentage column’ column. To begin the calculation, we have copied and pasted the figure of 53.29% in the ‘Cumulative% column.
The cumulative% of 75.96% has been calculated by adding 53.29% to 22.68%. Continue the calculation until you reach the last col.