Pareto Chart

When there is a project, very often the people working on it are asked to prioritize the tasks at hand. With the help of this analysis, they are able to differentiate between the 'trivial many' tasks and the 'vital few' tasks. Therefore, they know, which are the tasks which need to be given attention first. At the same time, it helps in time management as well as resource management. Resource both in terms of money power and man power are saved, when sufficient attention is paid to the vital few tasks. Therefore, it is often used in total quality management. A mathematical expression, called 80/20 rule is used for the same. It is said that it is the 20% of the causes, when result in 80% of the problem. However, there has to be tool, which will help us in identifying the 20% of the causes. This is where the Pareto chart comes into picture. In this write up, we will read about it in detail.

What is a Pareto Chart?

The other name given to this chart is Pareto diagram or Pareto analysis. There are two different types of variations, which are used in this chart. They are known as weighted Pareto chart and the comparative Pareto chart. It was Vilfredo Pareto, who is said to have invented the chart. He was an Italian economist. This chart contains both bar graph as well as line graph. The individual values are placed in the descending order by bars, while the line graph is used to display the cumulative total. The purpose of this chart is to graphically summarize the data and display it in terms of relative importance between the different groups of data. It helps in highlighting the largest set of factors. If it is used in terms of quality control, it is able to show the common source of defects, or the highest occurring defect, most repeated reason for customer complaints about a product, etc. In other words a great tool for customer relationship management.

To make a Pareto chart, the data is segmented in accordance of the data into different groups. These groups are also known as segments, bins or categories. The vertical axis on the left marks the frequency of occurrence. However, the left vertical axis can also be used ton display an unit of measure as well. On the other hand, the vertical axis on the right are used to depict cumulative percentage of the total number of occurrences. Often it is the total of a particular unit of measure are shown on this line. The reasons are placed on the horizontal axis and they are placed in the decreasing order. Hence, the cumulative function shows a concave function.

Pareto Chart Example

One can make this chart in Microsoft Excel as well as in OpenOffice. In other words, software which have spreadsheet programs (like Microsoft office) in them can be used for the same. We will try to understand the chart with the help of an example.

Product Returned Reasons Problem Total Count % of Total Cumulative % Performance not up to the mark 24 30 30 Not easy to use 18 22 52 Cheaper option available 15 19 71 Quality not as expected 13 16 87 Complicated instructions difficult to understand 10 13 100 Total 80 100 100

The above example shows the different reasons under which a particular product has been returned to the company. The total count, depicts the total number of times the product has been returned under a particular reason. It will help the company in assessing the reasons under which the particular product has been returned. The analysis will help in improving the product and reduce the chances of product returns.

You can also make a Pareto chart template, when you are using them often. The template will prove to be of great use. At the same time, it will also save you a lot of time and effort. It is important to arrange the data in descending order of frequency, as has been done in the Pareto chart above.