The Pareto Chart originated back in 1897 when Vilfredo Pareto (Italian Economist) created a formula representing the uneven distribution of wealth. It is what today is known as the 80/20 rule.
You might have come across a version of it in the past, e.g. 20% of the issues account for 80% of the defects.
A Pareto Chart is a simple bar chart that shows the frequency of defects in decreasing order of occurrence. It can be used as a prioritisation tool organise continuous improvement activities to have the biggest impact.
Types of Pareto Charts
A Pareto Chart can be split up in two types of analysis
- Counts Pareto Chart
- Cost Pareto Chart
Counts Pareto Chart
This analysis is used to identify which category occurs most often. The information needed to do the Counts Pareto Chart, is the categories and how often each occurred.
Cost Pareto Chart
This analysis is used to identify which category or issue cost your business the most. E.g. you have a problem A occurring 100 times, and a problem B occurring 20 times. If a Counts Pareto Chart was used, it would indicate that problem A is the one to focus on.
Suppose problem A cost £1 per occurrence which equals a total cost of £100 and Problem B cost £20 per occurrence which equals a total cost of £400. Based on this, it would be more beneficial to focus on problem B if looking from a cost perspective.
The information needed to do the Cost Pareto Chart, is the categories, how often each occurred, and the cost for each category.
Pareto Chart for Problem Solving
A Pareto Chart is a simple tool to use, but very effective for problem solving. It is part of the seven basic tools of quality control and is used for 8D Problem Solving as well.
A Pareto Chart can quickly show which business issues need attention the most. When using data (costumer complaints, feedback etc.) instead of intuition, there is no doubt about which issues are hurting your business the most.
If you are interested in Pareto Charts and Analysis, then our 8D Problem Solving Training might be interesting for you.
Our 8D Training is a detailed training on how to effectively solve problems and prevent them from reoccurring, and cover the use of Pareto Charts as part of the training.
Alternatively you can continue to our quality training page for an overview of the training we provide.Go to Quality Training