Pareto Chart Explained with Example With Excel Template.pdf

Pareto chart explained

1. 1
Pareto Chart Explained with
Example and Case Study
With Excel Template

2. PARATO
Diagram
VITAL FEW from TRIVIAL MANY

3. What is PARATO DIAGRAM?
Pareto diagram is a techniqueof
arranging data according to priority or
importanceand 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 problemsarise from a
fewof 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 that80%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.Juranin
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 theLorenz curveto
depict this in universal graph
form.

15. A Pareto chart is justa
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
priorityattention.
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 identificationof 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
benefitfrom the effort
expended.

25. Using Pareto
analysis, Quality
Circles find it easier
in selectionof
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 descendingorder.
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
factsand 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
howto make a
Pareto diagram
with the help of
an example.

30. A ceiling fan manufacturing industry wants to
improve its quality by reducingthe 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.NoTYPE 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%.
Identifyfew
contributors
from the diagram
which account
for about 80%of
the total.

33. Identifyfew
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 solvedor
satisfactorily attended, collectdata
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
satisfiedin your effort
to eliminatethe
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
causesof the quality
problems.
Sir, problem is that the
machine F & E is -----------
-----------------------------

40. Sometimes when you are on
the problem-solvingprocess,
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 ParatoChart and
conclude which defect should
be reduced 1
st
?

47. THANKS!
Do you have any questions?