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Pareto Chart Explained with
Example and Case Study
With Excel Template
PARATO
Diagram
VITAL FEW from TRIVIAL MANY
What is PARATO DIAGRAM?
Pareto diagram is a technique of
arranging data according to priority or
importance and using it into a
problem-solving framework.
This helps to find out the ‘VITAL FEW’
from the ‘USEFUL MANY’ for problem
selection.
ATTENSION SEEKER
It is often said
that one who
makes noise
always gets the
attention.
This is the fact
of life.
By this the most
important
aspect gets
neglected.
When it comes to
problem solving,
we cannot go by
this perception,
but we must rely
upon data & facts.
As said earlier
Pareto Analysis or Pareto Diagram
is a technique of arranging
data according to priority or
importance and using
it into a problem solving
framework.
This helps to find out the
"VITAL FEW"
from the
"USEFUL MANY"
for problem selection.
We can observe that most
of our problems arise from a
few of the sources.
I failed in my exams, I could not get
into the college tennis team, Mom is
annoyed with me, I am overweight.
God, life could not get any worse.
All this happened because of my
LAZINESS.
HISTORY
The Italian economist Vilfredo Pareto (1848-1923)
during his study of distribution of wealth in his
country observed that 80% of the wealth in Italy
belonged to about 20% of the population.
Vilfredo Pareto
Italy’s Wealth Distribution
Owned by 20% of the
population
Owned by 80% of the
population
20% of wealth
80 % of wealth
Study of wealth distribution by
Italian economist Vilfredo Pareto
(1848 - 1923) in his country.
Max .O. Lorenz
The U.S Economist Max .O. Lorenz presented this
distribution in a theoretical curve in 1905.
This curve is called
Lorenz’s curve of
concentration.
However, it was Dr.J.M.Juran in
mid 1920s who observed that the
Quality Defects are unequal in
frequency i.e., few defects
accounted for bulk of the
rejections or defectives. Dr. J . M . Juran
HISTORY
Ha!! This is interesting. A
few defects account for
majority of the defectives
0
100
200
300
400
500
600
700
800
Defective
Product
Insufficient
quantity
Incorrect
Shipment
Damaged
Product
Delayed
delivery
Nature of complaint
Numbers
Dr. J . M . Juran
Juran applied the name
'Pareto Principle' to this
Universal Phenomenon of
“Vital few, Useful many” and
applied the Lorenz curve to
depict this in universal graph
form.
A Pareto chart is just a
bar chart that arranges
the bars (counts) from
largest to smallest, from
left to right.
Now we understands
Two types of
pareto analysis
are available
to identify areas
which should receive
priority attention.
Based on
1. Phenomenon
2. Causes
Pareto Diagram based on Phenomenon
Quality : Defects, Faults, Failures, Complaints,
Return items, Repairs etc.
Cost: Amount of tax, expenses etc.
Pareto Diagram based on Phenomenon
Pareto Diagram based on Phenomenon
Delivery : Stock, Shortages, Defaults in payments, Delays
in delivery.
Operator : Shift, Group, Age, Experience, Skill, Individual
person etc.
Pareto Diagram based on Causes
Machine : Machines, Equipment, Tools, Modes, Instruments etc.
Pareto Diagram based on Causes
Pareto Diagram based on Causes
Raw Material : Manufacturer, Plant, Lot, Type etc.
Defective Materials produced
(Segregated Raw Material Lot wise)
The identification of the
most frequently occurring
source or reason is
necessary for instituting
appropriate counter
measures.
The analysis using Cost
as the basis is
necessary to derive
maximum financial
benefit from the effort
expended.
Using Pareto
analysis, Quality
Circles find it easier
in selection of
problem.
Ohhh!!! We
need to
select most
occurred
problem
Pareto diagrams include
three basic elements.
All factors which are
responsible for the total
effect, which are arranged in
a descending order.
This gives a clarity regarding
the level of contribution of
each factor.
The levels of contribution of each factor is expressed
numerically (in quantity as well as percentage)
Pareto Interpretation
1. Quantity/Frequency of occurence
2. % Contribution
3. Factor
Vital few
As you can see now
Pareto Diagram is a
good tool for
Problem selection.
This is based on data and
should help in decision
making i.e. which problem
we should tackle first.
Here decision is based on
facts and not on personal
preferences.
0
10
20
30
40
50
60
70
80
90
Worker F
Worker E
Worker C
Worker B
Worker A
Worker D
Worker G
100
80
60
40
20
0
%
Let us find out
how to make a
Pareto diagram
with the help of
an example.
A ceiling fan manufacturing industry wants to
improve its quality by reducing the number of
defective items.
The inspection report of one week as follows,
Case Study
Total fans inspected = 3000
Total fans defective = 273
Detailed Inspection Report
Sr.No TYPE OF DEFECT
NUMBER OF
FANS
1 Motor winding 35
2 Bend in Blades 15
3 Cracks on rod 14
4 Capacitor 10
5 Scratches 12
6 Regulator 100
7 Bend in screws 89
8 Others 14
How to Analyze the problem?
Let us observe the defects which constitute more
than 70%.
Identify few
contributors
from the diagram
which account
for about 80% of
the total.
Identify few
contributors from
the diagram which
account for about
80% of the total.
We have chosen first two defects of
Regulator & Bend in screws as the vital few.
Let us brainstorm to gather useful data to
find meaningful suggestions.
Once they are solved or
satisfactorily attended, collect data
on present situation on the defect
status for continuous
improvement.
The defects of Regulator & Bend in screws
seems to have reduced considerably. I
think we should collect fresh data on the
present situation
The present position maybe, that
those defects which were not in
priority earlier are now occupying
prime position and hence to be
taken up for solving .
Now we should concentrate
on motor winding and the
rest of the defects
CONTINUOUS IMPROVEMENT
MARS
Mars is actually a cold
place. It’s full of iron
oxide dust, which gives
the planet its reddish cast
Work on the same line
as earlier and carry on
till you are totally
satisfied in your effort
to eliminate the
problem.
USES OF PARETO ANALYSIS
The most obvious
and common use
of Pareto Analysis
is in prioritizing
and defining
problems.
The uses are as follows,
QUALITY CIRCLE
The Pareto principle and Pareto analysis help
the Quality Circle members to focus on those
few vital problems which, when carefully
addressed, will result in the maximum benefit
to the organization.
Pareto analysis is also
useful to identify the root
causes of the quality
problems.
Sir, problem is that the
machine F & E is -----------
-----------------------------
Sometimes when you are on
the problem-solving process,
one defect itself may need
detailed analysis. In such a
case you may draw a pareto
diagram for that defect for
diagnosis and for effectively
tackling it.
Situations when Pareto Analysis is difficult
If all the bars or most of the bars
are roughly the same height
If more than
50% categories
account for
60% of total
defect.
Careful analysis shows that such a thing should not happen.
In case of such a situation go for further stratification.
So let us stratify the
machines in the first
three colleges of the
previous problem
supplier wise.
CONCLUSION
Observation :
Stream 1 counts for maximum number of student failure.
Action :
Ask reason of failures from those who failed in stream 1 &
take appropriate action to solve the problem.
• With the help of pareto analysis we can present the data
gathered in a lucid manner which helps us to select 'Vital
few' areas. This way for a given effort we can get the
maximum benefit.
SUMMARY
• In order to find out the 'Vital few' factors we may have to
stratify the data available with us. Carry on the process of
stratification till you have a clearer picture.
• Pareto diagram is a visual method for separating the 'Vital
Few' from ' Useful Many.’
• This helps us in establishing consensus regarding priorities
based on facts. Therefore, it takes us quickly to the
action stage.
• Pareto also helps us to find out those items which are not
profitable for us to worry about on an immediate basis.
Sometimes such a mistaken notion, which we might get
due to lack of information, would also be cleared.
SUMMARY
Defect Category Defect Count
Defect 1 18
Defect 2 12
Defect 3 8
Defect 4 6
Defect 5 15
Defect 6 3
Defect 7 132
Defect 8 400
Activity Session
Draw the Parato Chart and
conclude which defect should
be reduced 1st?
THANKS!
Do you have any questions?

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Pareto Chart Explained with Example With Excel Template.pdf

  • 1. 1 Pareto Chart Explained with Example and Case Study With Excel Template
  • 3. What is PARATO DIAGRAM? Pareto diagram is a technique of arranging data according to priority or importance and using it into a problem-solving framework. This helps to find out the ‘VITAL FEW’ from the ‘USEFUL MANY’ for problem selection.
  • 4. ATTENSION SEEKER It is often said that one who makes noise always gets the attention.
  • 5. This is the fact of life. By this the most important aspect gets neglected.
  • 6. When it comes to problem solving, we cannot go by this perception, but we must rely upon data & facts.
  • 7. As said earlier Pareto Analysis or Pareto Diagram is a technique of arranging data according to priority or importance and using it into a problem solving framework. This helps to find out the "VITAL FEW" from the "USEFUL MANY" for problem selection.
  • 8. We can observe that most of our problems arise from a few of the sources. I failed in my exams, I could not get into the college tennis team, Mom is annoyed with me, I am overweight. God, life could not get any worse. All this happened because of my LAZINESS.
  • 9. HISTORY The Italian economist Vilfredo Pareto (1848-1923) during his study of distribution of wealth in his country observed that 80% of the wealth in Italy belonged to about 20% of the population. Vilfredo Pareto
  • 10. Italy’s Wealth Distribution Owned by 20% of the population Owned by 80% of the population 20% of wealth 80 % of wealth Study of wealth distribution by Italian economist Vilfredo Pareto (1848 - 1923) in his country.
  • 11. Max .O. Lorenz The U.S Economist Max .O. Lorenz presented this distribution in a theoretical curve in 1905. This curve is called Lorenz’s curve of concentration.
  • 12. However, it was Dr.J.M.Juran in mid 1920s who observed that the Quality Defects are unequal in frequency i.e., few defects accounted for bulk of the rejections or defectives. Dr. J . M . Juran HISTORY
  • 13. Ha!! This is interesting. A few defects account for majority of the defectives 0 100 200 300 400 500 600 700 800 Defective Product Insufficient quantity Incorrect Shipment Damaged Product Delayed delivery Nature of complaint Numbers Dr. J . M . Juran
  • 14. Juran applied the name 'Pareto Principle' to this Universal Phenomenon of “Vital few, Useful many” and applied the Lorenz curve to depict this in universal graph form.
  • 15. A Pareto chart is just a bar chart that arranges the bars (counts) from largest to smallest, from left to right. Now we understands
  • 16. Two types of pareto analysis are available to identify areas which should receive priority attention. Based on 1. Phenomenon 2. Causes
  • 17. Pareto Diagram based on Phenomenon Quality : Defects, Faults, Failures, Complaints, Return items, Repairs etc.
  • 18. Cost: Amount of tax, expenses etc. Pareto Diagram based on Phenomenon
  • 19. Pareto Diagram based on Phenomenon Delivery : Stock, Shortages, Defaults in payments, Delays in delivery.
  • 20. Operator : Shift, Group, Age, Experience, Skill, Individual person etc. Pareto Diagram based on Causes
  • 21. Machine : Machines, Equipment, Tools, Modes, Instruments etc. Pareto Diagram based on Causes
  • 22. Pareto Diagram based on Causes Raw Material : Manufacturer, Plant, Lot, Type etc. Defective Materials produced (Segregated Raw Material Lot wise)
  • 23. The identification of the most frequently occurring source or reason is necessary for instituting appropriate counter measures.
  • 24. The analysis using Cost as the basis is necessary to derive maximum financial benefit from the effort expended.
  • 25. Using Pareto analysis, Quality Circles find it easier in selection of problem. Ohhh!!! We need to select most occurred problem
  • 26. Pareto diagrams include three basic elements. All factors which are responsible for the total effect, which are arranged in a descending order. This gives a clarity regarding the level of contribution of each factor. The levels of contribution of each factor is expressed numerically (in quantity as well as percentage) Pareto Interpretation 1. Quantity/Frequency of occurence 2. % Contribution 3. Factor Vital few
  • 27. As you can see now Pareto Diagram is a good tool for Problem selection.
  • 28. This is based on data and should help in decision making i.e. which problem we should tackle first. Here decision is based on facts and not on personal preferences. 0 10 20 30 40 50 60 70 80 90 Worker F Worker E Worker C Worker B Worker A Worker D Worker G 100 80 60 40 20 0 %
  • 29. Let us find out how to make a Pareto diagram with the help of an example.
  • 30. A ceiling fan manufacturing industry wants to improve its quality by reducing the number of defective items. The inspection report of one week as follows, Case Study Total fans inspected = 3000 Total fans defective = 273
  • 31. Detailed Inspection Report Sr.No TYPE OF DEFECT NUMBER OF FANS 1 Motor winding 35 2 Bend in Blades 15 3 Cracks on rod 14 4 Capacitor 10 5 Scratches 12 6 Regulator 100 7 Bend in screws 89 8 Others 14
  • 32. How to Analyze the problem? Let us observe the defects which constitute more than 70%. Identify few contributors from the diagram which account for about 80% of the total.
  • 33. Identify few contributors from the diagram which account for about 80% of the total. We have chosen first two defects of Regulator & Bend in screws as the vital few. Let us brainstorm to gather useful data to find meaningful suggestions.
  • 34. Once they are solved or satisfactorily attended, collect data on present situation on the defect status for continuous improvement. The defects of Regulator & Bend in screws seems to have reduced considerably. I think we should collect fresh data on the present situation
  • 35. The present position maybe, that those defects which were not in priority earlier are now occupying prime position and hence to be taken up for solving . Now we should concentrate on motor winding and the rest of the defects
  • 36. CONTINUOUS IMPROVEMENT MARS Mars is actually a cold place. It’s full of iron oxide dust, which gives the planet its reddish cast Work on the same line as earlier and carry on till you are totally satisfied in your effort to eliminate the problem.
  • 37. USES OF PARETO ANALYSIS The most obvious and common use of Pareto Analysis is in prioritizing and defining problems. The uses are as follows, QUALITY CIRCLE
  • 38. The Pareto principle and Pareto analysis help the Quality Circle members to focus on those few vital problems which, when carefully addressed, will result in the maximum benefit to the organization.
  • 39. Pareto analysis is also useful to identify the root causes of the quality problems. Sir, problem is that the machine F & E is ----------- -----------------------------
  • 40. Sometimes when you are on the problem-solving process, one defect itself may need detailed analysis. In such a case you may draw a pareto diagram for that defect for diagnosis and for effectively tackling it. Situations when Pareto Analysis is difficult If all the bars or most of the bars are roughly the same height
  • 41. If more than 50% categories account for 60% of total defect. Careful analysis shows that such a thing should not happen. In case of such a situation go for further stratification.
  • 42. So let us stratify the machines in the first three colleges of the previous problem supplier wise.
  • 43. CONCLUSION Observation : Stream 1 counts for maximum number of student failure. Action : Ask reason of failures from those who failed in stream 1 & take appropriate action to solve the problem.
  • 44. • With the help of pareto analysis we can present the data gathered in a lucid manner which helps us to select 'Vital few' areas. This way for a given effort we can get the maximum benefit. SUMMARY • In order to find out the 'Vital few' factors we may have to stratify the data available with us. Carry on the process of stratification till you have a clearer picture.
  • 45. • Pareto diagram is a visual method for separating the 'Vital Few' from ' Useful Many.’ • This helps us in establishing consensus regarding priorities based on facts. Therefore, it takes us quickly to the action stage. • Pareto also helps us to find out those items which are not profitable for us to worry about on an immediate basis. Sometimes such a mistaken notion, which we might get due to lack of information, would also be cleared. SUMMARY
  • 46. Defect Category Defect Count Defect 1 18 Defect 2 12 Defect 3 8 Defect 4 6 Defect 5 15 Defect 6 3 Defect 7 132 Defect 8 400 Activity Session Draw the Parato Chart and conclude which defect should be reduced 1st?
  • 47. THANKS! Do you have any questions?