Italian economist Vilfredo Pareto originally developed the Pareto principle. He noticed that 80% of the land was owned by 20% of the population in Italy.
In the context of quality management, this chart was popularized by Joseph Juran.
According to Joseph Juran, this principle also applies to defects. He stated that 80% of the defects are caused by 20% causes. If you focus on those 20% causes, you'll be able to have a much more significant impact with limited resources.
What is Pareto Chart?
A Pareto chart (also known as a Pareto Diagram) or Pareto plot is a way to rank various causes contributing to an outcome visually.
This chart is similar to a bar chart, where the bars are arranged in descending order of magnitude. The x-axis shows each cause that contributes to the outcome, and the y axis shows how much of the total contribution it makes (frequency) relative to its place in the list — for example, 40%, 10% or 1%. In addition, the y-axis could also have the absolute numbers in addition to the proportional percentage.
This chart helps us identify major sources of problems so we can concentrate our efforts on them.
What is a Pareto Chart Used for?
Pareto Charts are used for problem analysis, process improvement, root cause analysis and process redesign.
They help you:
• Find out which causes contribute most to the outcome.
• Identify what's really important versus what's not.
• Prioritize the issues.
• See where action needs to occur.
What Are the Good Features of a Pareto Chart?
Quality practitioners use a Pareto chart when they need to understand the causes of a poor result. It allows them to see clearly what has contributed to the problem. The following features make a Pareto Chart an excellent visualization tool.
1. Easy to Understand and Interpret
You can understand a Pareto Chart in just seconds. It's really simple to read and interpret.
2. Simple to Create
You don't need sophisticated software to create one; all you need is Excel.
3. Helps Separate Vital Fews from Trivial Many
Using a Pareto Chart, you can separate key causes that lead to most problems. That way, you can focus your attention on a limited number of causes.
Tools for creating a Pareto Chart
Various tools can be used to create a Pareto Chart.
1. Manual: Using a pen and paper: This method can work only if the data is small.
2. Microsoft Excel: This is the most common tool used to create a Pareto Chart.
3. Minitab: Minitab is advanced statistical software Six Sigma professionals use. You can draw a Pareto Chart using Minitab.
4. Python: Python is a programming language that can be used for many different purposes. It is one of the most popular languages used today for data analysis. You can draw publication quality and professionally looking Pareto Chart using Python.
5. R Programming: R is a programming language used for complex statistical analysis. Like Python, you can use R Programming to draw publication quality Pareto Chart.
Knowing where to focus your efforts will enable you to do more with less effort.