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Pareto chart and

Analysis

By: - Rohit Kumar (Attri)

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Table of Contents
1. What is the Pareto chart
2. History of Pareto Chart
3. What is Power law Distribution and its example.
4. First analysis by Pareto chart
5. What is the principle of Pareto chart
6. When to use and procedure of Pareto chart.
7. How to make the Pareto chart in excel (Video)
8. How to make Pareto chart in MINITAB (Video)
9. Gaps in analysis
What is the Pareto chart 3

A Pareto chart is a type of chart that contains both bars and a 

line graph, where individual values are represented in descending order
by bars, and the cumulative total is represented by the line. or it
follows the Pareto principle

A Pareto chart is a bar graph. Which is used for the prioritization

of highest frequency occurrence defect and any variable in the
data in which the lengths of the bars represent frequency or cost
(time or money), and are arranged with longest bars on the left
and the shortest to the right. In this way the chart visually depicts
which situations are more significant.
The left vertical
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axis is the 
frequency of
occurrence The
right vertical axis
is the cumulative
percentage of the
total number of
occurrences, total
cost, or total of
the particular unit
of measure.
Because the values are 5
in decreasing order,
the cumulative
function is a 
concave function.
History of Pareto Chart 6
He was also the first to discover
It was invented by the Vilfredo that income follows a 
Pareto was an Italian civil engineer Pareto distribution, which is a 
, sociologist, economist, political power law probability
scientist, and philosopher. distribution. The Pareto principle
 was named after him
Born in 15 July 1848
Died in 19 August 1923

He made several important

contributions to economics, particularly
in the study of income distribution and
microeconomics.
What is Power law probability
distribution  
Power law is a functional
relationship between two
quantities, where a  of the length of its side, if the
relative change in one quantity
results in a proportional
relative change in the other
quantity, independent of the
initial size of those quantities:
one quantity varies as a power
 of another.
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Example of Power law probability
distribution  
 The area of a square in terms
length is doubled, the area is
multiplied by a factor of four,
Take an example of square
with length is “a” and the area
of the square is a² if the length
is doubled than the area will be
4a².
First analysis by Pareto chart 8

First research on Pareto : - Pareto

showed that approximately 80% of
the land in Italy was owned by 20%
of the population or 80% of a
nation’s income was in the hands
of only 20% of the population.

The Pareto principle applied to

raising funds: 20% of the donors
contribute 80% of the total
What is the principle of Pareto chart and example of 80-20 principle.
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There is no proper definition but it could be summarized

as follows:
80% of results are produced by 20% of causes.

20% of criminals commit 80% of crimes.

20% of drivers cause 80% of all traffic accidents.
80% of pollution originates from 20% of all factories.
20% of a company's products represent 80% of sales.
20% of employees are responsible for 80% of the results
When to use Pareto chart
1. When analysing data
about the frequency of
problems or causes in a
process
2. When there are many
problems or causes and you
want to focus on the most
significant
3. When analysing broad
causes by looking at their
specific components
4. When communicating
with others about your data
Procedure of Pareto chart
1. Decide what categories you will
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use to group items.
2. Decide what measurement is appropriate. Example : - frequency,
quantity, cost and time.
3. Decide what period of time the Pareto chart will cover: One work
cycle? One full day? A week?
4. Collect the data, recording the category each time, or assemble
data that already exist.
5. Subtotal the measurements for each category.
6. Determine the appropriate scale for the measurements you have
collected. The maximum value will be the largest subtotal
7. Construct and label bars for each category. Place the tallest at the
far left, then the next tallest to its right, and so on. If there are many
categories with small measurements, they can be grouped as “other.”
Gaps in the Analysis cum disadvantage 11
1. Root cause analysis cannot be done by itself in Pareto analysis. There is a
requirement of tool i.e. root cause analysis tool for determining or identify root
causes or major causes of defect.
2. It does not represent severity of defect or any problem. It only shows
qualitative data.
3. Pareto analysis only focuses on past data where damaged has already happened.
Yes, past data is essential too, but it’s not necessary that it will be relevant in
future scenarios also. Therefore, it should focus on past data as well as present and
future data also.
4. Pareto analysis cannot be applied to all cases. It is limited to some cases only.
5. There are other disadvantages also like mistake in scoring problems, mistake in
applications, etc.
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Thank You