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Pareto Chart

• Understand what the Pareto law is• Understand what a Pareto diagram is• Provide Pareto analysis by level• Provide examples of Pareto diagrams• Understand how a simple tool can be very powerful

in problem solving

Objectives

Pareto Law

• The Pareto law states that a small number of the causes is responsible for a large percentage of the effects.

• It is also called the 80-20 rule

Pareto Diagram

Definition A data display tool that breaks down discrete observations into separate categories for the purpose of identifying the “vital few” and separating them from the trivial many

Frequency

Reason

C A B E D

Pareto Chart: examples

15 % of the customers generate 80% of the sales!

Sales Volume by Customer

80%

55%

100%

0

10,000

20,000

30,000

40,000

50,000

60,000

Top 20 Next 70 Other 550

0%10%

20%30%

40%50%

60%70%

80%90%

100%

Pareto & Process improvement

Helps to focus improvement efforts on areas where the largest gains can be made

- Gathers input from all team members

- To logically group potential causes for defects (x’s)

- Helps to test ideas

- Helps scope a project

Constructing a Pareto diagram

- Define categories

-Choose them based on impact

-Assure the “other” category is small

- Sort data in descending order

- Plot the data

(May need several Pareto’s to hone in on potential causes)

first level example

66%81%

91%96% 98% 100%

-

50

100

150

200

250

300

350

Missing Screws Missing Clips Leaky Gasket Defective Housing Unconnected Wire Others

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pareto Chart on inspection rejections

Simple and very powerful tool

second level

Any relationship between the numbers of missing screws and the shift?

58%

80%

90%

100%

-

50

100

150

200

250

300

350

Night Evening Afernoon Morning

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Team tests ideas and/or kill ghosts: Pareto on missing screws by shift

Pareto Diagram – category examples

Certif icat ion

Cast ing reject

Pipe rework

Cert ificat io

n and Drive

r upgrade

Split shipment

Driver upgrad

e

40 40 60 70150250 6,6 6,6 9,811,524,641,0

100,0 93,4 86,9 77,0 65,6 41,0

600

500

400

300

200

100

0

100

80

60

40

20

0

Mistake

CountPercentCum %

Perc

ent

Cos

ts

additional costsPareto Chart for Mistake and

MarkKaren

Pierre

360 140 11059,0 23,0 18,0 59,0 82,0 100,0

0

100

200

300

400

500

600

0

20

40

60

80

100

Engineer

CountPercentCum %

Perc

ent

Cos

ts

Pareto Chart for Contract Engineersand additional costs

MarkKaren

Pierre

5 2 162,5 25,0 12,5 62,5 87,5 100,0

0

1

2

3

4

5

6

7

8

0

20

40

60

80

100

Engineer

CountPercentCum %

Perc

ent

Cou

nt

Pareto Chart for ContractEngineers and late deliveries

Driver u

pgrade

Certif icat io

n

Certificat io

n and D

river upgrade

Pipe rework

O thers

5 1 1 1 062,5 12,5 12,5 12,5 0,0 62,5 75,0 87,5 100,0 100,0

0

1

2

3

4

5

6

7

8

0

20

40

60

80

100

Mistakes

CountPercentCum %

Perc

ent

Cou

nt

Pareto Chart for Mistake and Late Deliveries

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