3.

The Pareto Chart

The Pareto Principle
Have you ever noticed how it always seems to be that a small
number of people / problems / customers give you the most trouble?
Well it turns out this can be explained by something called the
Pareto principle.
The Pareto principle also known as the 80-20 rule states that, in
many situations, roughly 80% of the effects come from 20% of the
causes.
Business management thinker Joseph Juran suggested this principle
and named it after Italian economist Vilfredo Pareto, pictured to the
right, who observed in the early 1900s that approximately 80% of the
land in Italy was owned by 20% of the population.
Now, to be sure, the results of Pareto analysis dont always work out to be exactly 80/20
sometimes you might see 70/30 or even 90/10. But the key is, more often than not, well begin to
see that a certain group of causes create the greatest effect.

Widely Applicable
The Pareto principle applies to many other aspects
of our lives. For example, studies have shown that
generally speaking, 20% of the people have 80%
of the wealth. People like Bill Gates and Warren
Buffet immediately come to mind when I think of
this situation.
And when we think about our personal
productivity and the productivity of those around
us its been shown that approximately 20% of
our efforts generate 80% of our results.
And specific to the quality problems we experience
within our organizations, the Pareto principle is highly useful because it allows us to identify and focus
on the vital few causes that result in 80% or more of our problems. Focusing on these vital few
causes makes problem solving much easier.

4. The Pareto Chart

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The Pareto Chart

A Pareto Chart is a vertical bar graph
where values are plotted in descending
order of frequency from left to right thus
identifying the vital few and separating
them from the trivial many.
As we can see here a Pareto Chart looks
very similar to the bar graph we learned
about earlier.
The main differences are the bars are
always placed in descending order and we
also calculate what percentage of the total
population each bar accounts for.

Second Level Pareto Charts

In some cases the first level Pareto may create additional questions. For example, in the Pareto chart
above its possible the team will want to learn more about the Label Unreadable defect type.
In order to accomplish this, a second level Pareto chart can be created allowing us to drill down
and learn more about this particular defect as shown below.

4. The Pareto Chart

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