In Brief

Pareto Analysis

What is it?
A bar graph used to arrange information in such a way that priorities for process improvement can be established.

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.

The method was invented by Vilfredo Pareto (1848-1923), an Italian economist and sociologist. He discovered that 80 percent of the wealth in Italy was held by only 20 percent of the population, hence the 80/20 rule.

How to use it?

List all elements of interest
Measure the elements, using same unit of measurement for each element
Order the elements according to their measure
Calculate the percentage for each element out of the total measurement
Accumulate the percentage from top to bottom to equal 100 %
Create a bar and line graph, line representing cumulative percentage
Work on the most important element 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.

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