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Pareto analysis (80/20 Rules)

Pareto analysis (80/20 Rules)

Pareto analysis introduced by an Italian economist Wilfredo Pareto who worked with income and other unequal distributions in 19th century. He noticed that 80% of the wealth was owned by only 20% of the population which means the majority of the defects are caused by a few defective items. Later Pareto principle was developed by Japan in 1950. A Pareto chart is a special type of histogram that can easily be applied to find and prioritize quality problems conditions are their causes of in the organization. Pareto charts are a type of bar charts unless the horizontal axis represents categories of interest rather than a continuous scale the categories are often defects. Pareto charts can help to focus improvement on areas.
The Pareto chart is very important part of the seven basic tools of quality control, is type of chart that contains both Mars and a line graph. Where individual values, bar are represented in descending order, and the accumulative total is represented by the line. A point-to-point graph, which shows the accumulative related frequency, may be modulating on the bar graph. Because the values of the statistical jumpy are placed in order of proportionate frequency, the graph clearly show which factors have the greatest impact and where attention is likely to yield the greatest benefit. The Pareto principle states that, for many events, roughly 80% of the difficulty comes from 20% of the problems.

Pareto chart

Pareto chart as much as 95% of quality related problems in the factory can be solved with seven fundamental quantitative tools kayo Ishikawa. We need quality tools or problem solving tools for continual improvement and process measurement. "Pareto principal a part of quality management focused on fulfilling quality requirements" it is defined as per ISO 1900.

This is determine on three aspects

  • Factor such as control, job management, defined and well-managed processes, performance and integrity criteria, and identification of records.
  • Competence such as knowledge, skill, experience, and qualifications.
  • Soft elements, such as employee, integrity, confidence, organizational culture, motivation, team spirit, and quality relationship. 

When to use Pareto chart

  • When analyzing data about the frequently problems or causes in a process.
  • When there are many problems or causes and you want to focus on the most portents.
  • When analyzing wide causes by looking at their specific components.
  • When communicating with others about your data.
  • Allow that are use of limited resources.

Pareto chart procedure 

  • Material needed: white sheet, notes, graph paper, pens, scale, etc.
  • To decide that what category you will use to group items. 
  •  Decide what measurement is appropriate, common measurement our frequency, quantity, cost and time.
  • To decide that Pareto of time the Pareto chart will cover: one work cycle? One full day? a week?
  • Pick on the data, recording the category each time.
  • Subtotal the measurement for each category.Determine the appropriate scale for the measurement you have collected. The maximum value will be the large subtotal from step 5. Note the scale on the left side of the chart.
  • Construct and label bars for each category. Place the tallest at the far left. Then the next tall to its right and so on. If there are many category having with small measurements. They can be grouped as "other" Calculate the percentage for every category: the subtotal for that category divided by the total for all categories. Draw a right vertical axis and identify it with percentages. Be sure the two scales match: for example the left measurement that corresponds to one half should be exactly against 50% on the right scale.
  • Calculate and draw accumulative sums and Add the subtotal for the first and second categories, and place a dot above the second bar indicating that sum. To that sum add the subtotal for the third category, and placed on above the third bar for that new sum continue the process for all the bars. Affix the dots, starting at the top of the first bar; the last dot should reach 100% on the right scale. 

Benefit of Pareto chart

  • Identifies major problems.
  • Improves team performance and effectiveness.
  • Before and after tracking of a problem in chart. 


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