April 17th, 2012 Pareto Chart

A Pareto chart is a special type of bar chart where the values being plotted are arranged in descending order. The graph is accompanied by a line graph which shows the cumulative totals of each category, left to right. The chart is named after Vilfredo Pareto, and its use in quality assurance was popularized by Joseph M. Juran and Kaoru Ishikawa.

 

The Pareto chart is one of the seven basic tools of quality control, which include the histogram, Pareto chart, check sheet, control chart, cause-and-effect diagram, flowchart, and scatter diagram. See glossary of quality management.

 

Typically on the left vertical axis is frequency of occurrence, but it can alternatively represent cost or other important unit of measure. The right vertical axis is the cumulative percentage of the total number of occurrences, total cost, or total of the particular unit of measure. The purpose is to highlight the most important among a (typically large) set of factors. In quality control, the Pareto chart often represents the most common sources of defects, the highest occurring type of defect, or the most frequent reasons for customer complaints, etc.

 

Their use gives rise to the 80-20 Rule that 80 percent of the problems stem from 20 percent of the causes.

 

Pareto chart is also called: Pareto diagram, Pareto analysis

 

Variations are weighted Pareto chart, comparative Pareto charts.

 

Description of Pareto Chart

A Pareto chart is a bar graph. The lengths of the bars represent frequency or cost (time or money), and are arranged with longest bars on the left and the shortest to the right. In this way the chart visually depicts which situations are more significant.

 

When to Use a Pareto Chart

 

- When analyzing data about the frequency of problems or causes in a process.
- When there are many problems or causes and you want to focus on the most significant.
- When analyzing broad causes by looking at their specific components.
- When communicating with others about your data.

 

Pareto Chart Procedure

1. Decide what categories you will use to group items.

 

2. Decide what measurement is appropriate. Common measurements are frequency, quantity, cost and time.

 

3. Decide what period of time the Pareto chart will cover: One work cycle? One full day? A week?

 

4. Collect the data, recording the category each time. (Or assemble data that already exist.)

 

5. Subtotal the measurements for each category.

 

6. Determine the appropriate scale for the measurements you have collected. The maximum value will be the largest subtotal from step 5. (If you will do optional steps 8 and 9 below, the maximum value will be the sum of all subtotals from step 5.) Mark the scale on the left side of the chart.

 

7. Construct and label bars for each category. Place the tallest at the far left, then the next tallest to its right and so on. If there are many categories with small measurements, they can be grouped as other.

 

Steps 8 and 9 are optional but are useful for analysis and communication.

 

8. Calculate the percentage for each category: the subtotal for that category divided by the total for all categories. Draw a right vertical axis and label it with percentages. Be sure the two scales match: For example, the left measurement that corresponds to one-half should be exactly opposite 50% on the right scale.

 

9. Calculate and draw cumulative sums: Add the subtotals for the first and second categories, and place a dot above the second bar indicating that sum. To that sum add the subtotal for the third category, and place a dot above the third bar for that new sum. Continue the process for all the bars. Connect the dots, starting at the top of the first bar. The last dot should reach 100 percent on the right scale.

 

Pareto Chart Examples

Example #1 shows how many customer complaints were received in each of five categories.

 

Example #2 takes the largest category, �documents,� from Example #1, breaks it down into six categories of document-related complaints, and shows cumulative values.

 

If all complaints cause equal distress to the customer, working on eliminating document-related complaints would have the most impact, and of those, working on quality certificates should be most fruitful.

 

 

 

 

 

Excerpted from Nancy R. Tague�s The Quality Toolbox, Second Edition, ASQ Quality Press, 2004, pages 376-378.

 

References

http://www.asq.org/learn-about-quality/cause-analysis-tools/overview/pareto.html

http://en.wikipedia.org/wiki/Pareto_chart