Pareto Charts

[Steven Bonacorsi]

Pareto (pa-RAY-toe) analysis is named after Vilfredo Pareto, an
Italian economist who lived in the late 19th and early 20th centuries.
In 1897, he presented a formula that showed that income was
distributed unevenly, with about 80% of the wealth in the hands of
about 20% of the people.

In a similar way, a disproportionately large percentage of errors or
defects in any process are usually caused by relatively few problems.
Pareto analysis helps identify those significant few problems so
people can target them for action. It is particularly helpful in the
measure and control phases of Six Sigma methodology.

What can it do for you?

There are so many aspects of work that can be improved, knowing where
to begin is often difficult. Pareto analysis will help you:

· Categorize and stratify such things as errors, defects, delays,
customer complaints or any other measures of the resulting quality of
your process so that you can identify different classes or types of
problems.

· Graphically display your results so that the significant few
problems emerge from the general background.

How do you do it?

1. Decide how to classify your problems. This may involve looking at
the reasons cited for returned or rejected material, talking to your
customer, or examining the rework aspects of your process.

2. Create a preliminary list of problem categories. Try to keep this
list to no more than six or seven. (You may find yourself modifying
this list as you continue your analysis.)

3. Decide on a time frame or other scope limitations on the material
you will consider. The time frame or scope you choose should be
representative of the whole process you are examining.

4. Tally the occurrences in each problem classification. If cost or
time is an issue, you may wish to tally the cost or time involved in
each problem classification. If a problem does not fit in any of your
classifications, tally it as other.

5. Determine the total occurrences (or total cost or total time) in
each classification. Add these totals to produce a grand total.

6. Divide each classification total by the grand total to determine
the percentage that each individual problem classification represents
of all the problems.

7. Arrange the problem classifications in order from highest value or
most frequent to lowest value or least frequent. The other category
should always be put last even if it is larger than some of the
others.

8. Draw a horizontal axis and two vertical axes. Mark the left
vertical axis in increments from zero to the grand total of all the
problem classifications. Mark the right vertical axis in increments
from zero to 100%.

9. Construct the vertical bar diagram beginning on the left with the
highest percentage classification and progressing to the lowest and
ending with other. The height of each bar should correspond with the
value or number of occurrences on the left axis and the percentage of
the total on the right axis. The width of the bars should be the same
and they should be touching.

10. Label the bars under the horizontal axis.

11. Beginning at the left zero point, plot a line showing the
cumulative percentage total reached with the addition of each problem
classification. The line should end at the 100% mark on the right
axis.

12. Title the chart. It is also a good idea to write a brief summary
telling how and when you collected the data you used to produce your
Pareto chart.

NOTE: The first pass at a Pareto chart may identify a significant
problem that is still too big to work on. A second Pareto analysis may
be necessary to break this most significant problem into workable
pieces.

Now what?

If everyone tried to make improvements individually with no definite
basis for what they were doing, much energy would produce
disappointing results. A Pareto chart is a useful tool to draw the
attention and cooperation of all concerned to target the most
important problems affecting quality.

· Use the Pareto chart as a basis to divide and conquer problems. It
tells you what to work on first.

· It is normally easier to reduce a tall bar by half than to reduce a
short bar to zero. Use the Pareto chart like a map to island hop.
Significantly reduce one big problem, then hop to the next. Leave the
smaller problems for mopping up later.

· Of course, if you find a small problem that is easy to fix, don't
ignore it, but don't get tangled in chasing small problems or trying
to fix everything at once.

· After you have worked on the problems for a while, use the same
techniques to collect data again and create a new Pareto chart.

The new chart will tell you how you are doing. Use the data on the new
chart to identify and target the new most significant problems.

Pareto charts can be used to identify problems to work on. They can
help you produce greater efficiency, conserve materials, reduce costs
or increase safety. They are most meaningful, however, if your
customer, the person or organization that receives your work, helps
define the problem categories.


Steven Bonacorsi is a Certified Lean Six Sigma Master Black Belt
instructor and coach. Steven Bonacorsi has trained hundreds of Master
Black Belts, Black Belts, Green Belts, and Project Sponsors and
Executive Leaders in Lean Six Sigma DMAIC and Design for Lean Six
Sigma process improvement methodologies.

Author for the Process Excellence Network (PEX Network / IQPC)

Process Excellence Network
Steven Bonacorsi, President of International Standard for Lean Six
Sigma(ISLSS)
Certified Lean Six Sigma Master Black Belt
47 Seasons Lane
Londonderry, NH 03053
Phone: +(1) (603) 401-7047
E-mail: sbona...@islss.com
Process Excellence Network: http://bit.ly/n4hBwu

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