Pareto Diagrams

Explanation of how to develop a Pareto Diagram

1. Pareto DiagramsPareto Diagrams
Made Easy!Made Easy!

2. History of ParetoHistory of Pareto
•Vilfredo Pareto (1848 – 1923)Vilfredo Pareto (1848 – 1923)
–Established the 80/20 RuleEstablished the 80/20 Rule
•Also known as “the vital few and the trivial manyAlso known as “the vital few and the trivial many
–Interpreted as 80% of the world’s riches are Interpreted as 80% of the world’s riches are
controlled by 20% of the populationcontrolled by 20% of the population

3. What are Pareto Diagrams?What are Pareto Diagrams?
•They are specialized column graphsThey are specialized column graphs
•Used to identify major and minor issuesUsed to identify major and minor issues
•Helps to prioritize issues clearlyHelps to prioritize issues clearly
•Easily understood and commonly used in Easily understood and commonly used in
Management PresentationsManagement Presentations

4. How to make a Pareto DiagramHow to make a Pareto Diagram
•The first requirement is to use this for The first requirement is to use this for
accurately collected data related to one accurately collected data related to one
issueissue
•Although similar to a column graph, it has Although similar to a column graph, it has
a cumulative feature that will equal 100%a cumulative feature that will equal 100%

5. Beginning a ParetoBeginning a Pareto
•Here is a standard Here is a standard
example of a bar example of a bar
graph depicting the graph depicting the
number of errors in number of errors in
the data input process the data input process
for invoicesfor invoices
0
20
40
60
80
100
120
140
160
180
200
Data Input
Errors
Source Data
Errors
Customer
Error
Sales Rep.
Error
Series2

6. Finishing a ParetoFinishing a Pareto
•In this example, a In this example, a
cumulative line is cumulative line is
added after each added after each
column extending to column extending to
the limit of 100%the limit of 100%

7. Benefits of a ParetoBenefits of a Pareto
•It clearly displays which data is most significant It clearly displays which data is most significant
•Allows easier decision making as to which issues Allows easier decision making as to which issues
to attack firstto attack first
•Upholds the theory that 80% of problems are Upholds the theory that 80% of problems are
caused by 20% of the issuescaused by 20% of the issues
•Allows you to maximize your results by attacking Allows you to maximize your results by attacking
major issues firstmajor issues first
•Most cost effective use of resources to solve Most cost effective use of resources to solve
problemsproblems