What is Pareto Analysis?
Pareto
analysis is a statistical technique used to define the most effective
parameters from many parameters. Pareto analysis is also known as 80/20 rule
because a majority of the problems (80%) are due to significant causes (20%).
Pareto analysis was suggested by American Engineer and management consultant
Joseph M. Juran (Romanian by birth), he named it after Italian economist
Vilfredo Pareto, who observed that 80% of total income in Italy was with 20% of
the population. Pareto analysed this in some other countries and found the
same.
How to make Pareto Analysis?
Requirements: Data which you want to analyse
Procedure:
1.
Collect the causes and occurrence of causes.
2.
Now sort causes in descending order considering occurrence, so
cause with highest number of occurrence will be on top and cause with the
lowest occurrence will be on bottom.
3.
Now calculate cumulative causes for each cause (example shown in
template file)
4.
Now calculate the cumulative percentages of each cause in
descending order.
5.
Create a bar chart (vertical) with causes on x-axis and number of
occurrences on the y-axis.
6.
Now create second axis with percentages descending in increment of
10% from 0% to 100%.
7.
Plot the cumulative count of percentage of each cause on x-axis.
8.
Joint the points to draw a curve.
9.
Draw a straight line from 80% to the point until it intersect the
curve. After that draw another straight line from that intersection point to
x-axis.
10. Point on x-axis defines the
major causes (left side) according to 80/20 and the causes on the right side
are minor.
Our analysis is competed,
based upon above analysis we should focus on the causes which are identified as
major causes.
Example of Pareto Analysis:
Any Question?
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