1. BUSINESS DECISION MAKING & PROBLEM SOLVING
PARETO ANALYSIS
PRESENTED BY: ABUBAKAR AZIZ
RMBA-FAL-11011

2. PARETO ANALYSIS…..?

Pareto Analysis is a simple technique for prioritizing possible
changes by identifying the problems that will be resolved by
making these changes.

By using this approach, you can prioritize the individual
changes that will most improve the situation.

3. HOW TO USE THE TOOL

Step 1: Identify and List Problems

Step 2: Identify the Root Cause of Each Problem

Step 3: Score Problems

Step 4: Group Problems Together By Root Cause

Step 5: Add up the Scores for Each Group

Step 6: Take Action

4. EXAMPLE : E&C INC. BUILDING REMEDIATION
CONTRACTOR
Data Analysis
Top Cause Factor and the number of Occurrences:
Cause Factor
Unit Cost
# of Occurrences per year
Violations
5,000
2
Communication Errors
185
80
Over staffing
240
60
Failed Clearance
1.500
36
Cross Contamination
12,000
1

5. EXAMPLE : E&C INC. BUILDING REMEDIATION
CONTRACTOR

Data Analysis

Cause Factors and their Cost:
Cause Factor
Total cost
Violations
10,000
Communication Errors
14,800
Over staffing
14,400
Failed Clearance
54,000
Cross Contamination
12,000

6. EXAMPLE : E&C INC. BUILDING REMEDIATION
CONTRACTOR

Data Analysis

Cost Factors with their Cost Contribution:
Cost factor
# of
occurrences
per year
Unit cost
Total cost
% of the cost
Cumulative %
Failed Clearance
36
1,500
54,000
51.33
51.33
Communication
Errors
80
185
14,800
14.07
65.40
Over staffing
60
240
14,400
13.69
79.09
Cross
Contamination
1
12,000
12,000
11.41
90.49
Violations
2
5,000
10,000
9.51
100
Total
179
105,200

8. BENEFITS OF THE PRETO ANALYSIS

It clearly displays which data is most significant

Allows easier decision making as to which issues to attack
first

Upholds the theory that 80% of problems are caused by 20%
of the issues

Most cost effective use of resources to solve problems