Lesson 1 pareto analysis

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Lesson 1 pareto analysis

  1. 1. Lesson 1 Pareto Analysis
  2. 2. PARETO ANALYSIS Developed by Alfredo Pareto (1848-1923) Study the distribution of wealth in Europe. Juran coined the phrase:- “Vital Few and Trivial Many” Pareto diagram a graph that ranks classifications in descending order from left to right. Vital Few - left Trivial Many- right
  3. 3. Steps to Pareto Analysis 1. Arrange data in descending order 2. Calculate “percentage” for each problem 3. Calculate cumulative percentage 4. Plot individual problems (sources)on x axis (histogram/ bar chart) – IMPORTANT: Start with highest on the left hand side 5. Plot individual values related to each problem (source) on left side y axis 6. Plot cumulative percentages in ascending order on the right hand side y axis 7. Draw the cut-off line at 80%
  4. 4. PARETO ANALYSIS EXAMPLE In a customer satisfaction survey at a local fast-food restaurant, the following complaints were lodged:- Complaint # of complaints Cold food 105 Flimsy utensils 2 Food tastes bad 10 Salad not fresh 94 Poor Service 13 Food to greasy 9 Lack of Courtesy 2 Lack of cleanliness 25
  5. 5. Cold food 105 Salad not fresh 94 Lack of cleanliness 25 Poor Service 13 Food tastes bad 10 Food to greasy 9 Flimsy utensils 2 Lack of Courtesy 2 Arrange data in descending order
  6. 6. Cold food 105 40% 40 Salad not fresh 94 36% 76 Lack of cleanliness 25 10% 86 Poor Service 13 5% 91 Food tastes bad 10 4% 95 Food to greasy 9 3% 98 Flimsy utensils 2 1% 99 Lack of Courtesy 2 1% 100 Problem Sources Actual Percentage Cumulative
  7. 7. 0 50 100 150 1 2 3 4 5 6 7 8 Percentage #ofComplaint Complaint Pareto Analysis
  8. 8. Final Step to Pareto Analysis • State your conclusion and make recommendations as follows: - Mention that Pareto is based on the 80/20 principle and explain what this means (i.e. 20% of the problem sources are responsible for 80% of all problems or complaints) - By addressing this 20% (approximate), management can solve approximately 80% of the problems, therefore management should start addressing quality problems in the order demonstrated by the Pareto analysis - List the problems that need to be addressed - State that these are the vital few, while the others many be considered the trivial many.

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