Definition: A bar graph used to arrange information in such a way that priorities for process improvement can be established.
Purposes:
To display the relative importance of data. To direct efforts to the biggest improvement opportunity by highlighting the vital few
in contrast to the useful many.
Pareto diagrams are named after Vilfredo Pareto, an Italian sociologist and economist, who invented this method of information presentation toward the end of the 19th century. The chart is similar to the histogram or bar chart, except that the bars are arranged in decreasing order from left to right along the abscissa. The fundamental idea behind the use of Pareto diagrams for quality improvement is that the first few (as presented on the diagram) contributing causes to a problem usually account for the majority of the result. Thus, targeting these "major causes" for elimination results in the most cost-effective improvement scheme.
How to Construct:
- Determine the categories and the units for comparison of the data, such as frequency, cost, or time.
- Total the raw data in each category, then determine the grand total by adding the totals of each category.
- Re-order the categories from largest to smallest.
- Determine the cumulative percent of each category (i.e., the sum of each category plus all categories that precede it in the rank order, divided by the grand total and multiplied by 100).
- Draw and label the left-hand vertical axis with the unit of comparison, such as frequency, cost or time.
- Draw and label the horizontal axis with the categories. List from left to right in rank order.
- Draw and label the right-hand vertical axis from 0 to 100 percent. The 100 percent should line up with the grand total on the left-hand vertical axis.
- Beginning with the largest category, draw in bars for each category representing the total for that category.
- Draw a line graph beginning at the right-hand corner of the first bar to represent the cumulative percent for each category as measured on the right-hand axis.
- Analyze the chart. Usually the top 20% of the categories will comprise roughly 80% of the cumulative total.
Tips:
Create before and after comparisons of Pareto charts to show impact of improvement
efforts. Construct Pareto charts using different measurement scales, frequency, cost or time. Pareto charts are useful displays of data for presentations. Use objective data to perform Pareto analysis rather than team members opinions. If there is no clear distinction between the categories -- if all bars are roughly the
same height or half of the categories are required to account for 60 percent of the effect
-- consider organizing the data in a different manner and repeating Pareto analysis. Pareto analysis is most effective when the problem at hand is defined in terms of
shrinking the PV to a customer target. For example, reducing defects or elimination the non-value added time in a process.
