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# Pareto Analysis

What it is
Pareto Analysis is used to record and analyse data relating to a problem
in such a way as to highlight the most significant areas, inputs or issues.
Pareto Analysis often reveals that a small number of failures are
responsible for the bulk of quality costs, a phenomenon called the
Pareto Principle.

This pattern is also called the 80/20 rule and shows itself in many ways.
For example:

## 80% of sales are generated by 20% of customers.

80% of Quality costs are caused by 20% of the problems.
20% of stock lines will account for 80% of the value of the stock.

## A Pareto diagram allows data to be displayed as a bar chart and enables

the main contributors to a problem to be highlighted.

## define categories of defects which cause a particular output

(product, service, unit) to be defective;
count the frequency of occurrence of each defect;
display graphically as a bar chart, sorted in descending order, by
frequency of defect;
use a second y axis to show the cumulative % of defects .

1 Pareto Analysis
Pareto Analysis
How to use it
1. Gather facts about the problem, using Check Sheets or
Brainstorming, depending on the availability of information.

## 4. It can also be helpful to add a line showing the cumulative percentage

of errors as each category is added. This helps to identify the
categories contributing to 80% of the problem.

## 5. Review the chart if an 80/20 combination is not obvious, you may

need to redefine your classifications and go back to Stage 1 or 2.

Examples
When possible, use Minitabs version, as an industry standard,
rather than creating one in Excel - refer to Example 1 in this section

## Use a series of Pareto charts to drill down to more detail - Example 2

Recognise the 80: 20 principle but if the original Pareto is very flat be
prepared to cut the defects in a different way, say 40:60 - Example 3

## Minitab gives an extra dimension to Pareto Analysis - Example 4

2 Pareto Analysis
Pareto Analysis
Examples
Example 1 : Minitabs version of Pareto is used as an industry standard.
It gives summary information and starts the cumulative % count at the
top of the first bar:

## Pareto of D3 Small Engine Card Faults

600 100

500 80

400

Percent
60
Count

300
40
200
20
100

0 0
c. e air al
d pe d an d ar d ed ep ov
ed aulty ing Fitte c t. S oint der e atpl f itte h Bo ds r
f itt ic R Rem blem hort ec to tion s
ag t F ss p. le J ol He Mis g a s
e Mi no ar y Pr o r S onn ina ther
s m
Defect Da m en Mi om et E med t S ing nt
n t o e h r ou
g L e o n
pt po Cmp ong Cot Me ef or nts n ouch pon not t Lon k Wir d Ec autio hioko Sold ulty Cont
l e C am O
Cm Com Wr pt n
D Joi t T om gs
L in y on r ec T Fa
m m p C Le e P
Count 141 139 C69 52 22 C20 20 17 17 17 B16 13 10 10 10 8 6 5 29
Percent 23 22 11 8 4 3 3 3 3 3 3 2 2 2 2 1 1 1 5
Cum % 23 45 56 65 68 71 75 77 80 83 85 87 89 91 92 94 95 95 100

3 Pareto Analysis
Pareto Analysis
Examples
Example 2 : a series of Pareto charts drill down to more detail:

1st level
100 Analysis
70
gives
60 80

50
Design
as main

Percent
60
Count

40

30 40 cause of
20
20
failure
10
0 0

Defect De
s ign
mp
on
en
t
Bu
ild
Oth
er 2nd level
Co

## Count 57 13 4 2 Analysis gives

Percent
Cum %
75.0
75.0
17.1
92.1
5.3
97.4
2.6
100.0 breakdown of
Design

Design Faults

100
50
80
40
Percent

60
Count

30
40
20

10 20

0 0
le s ule n
du tor rt od atio
Mo Mo Sta rM libr n
Defect nn
ec
t
rqu
e
Co
ld du
ce
IC
Ca IOP Imo
Co To ns AS
Tra
Count 21 10 8 8 5 3 2
Percent 36.8 17.5 14.0 14.0 8.8 5.3 3.5
Cum % 36.8 54.4 68.4 82.5 91.2 96.5 100.0

4 Pareto Analysis
Pareto Analysis
Examples
Example 3 : if the original Pareto is very flat, be prepared to cut the
defects in a different way, here, it is 40:60

## Pareto Chart for Child11

100

200
80

Percent
60
Count

100 40

20

0 0
0 7E
88 46 77 80 82 95 6-1
82
3
4- 4
1
6- 7 27 er s
Defect KD
CC7
KD
CC6
KD
CC7
KD
CC7
KD
CC7
KD
CC7
- 56
4- 81
-66 4- 7 Oth
40 40 0 - 56
4
Count 18 13 11 11 11 10 9 9 8 138
Percent 7.6 5.5 4.6 4.6 4.6 4.2 3.8 3.8 3.4 58.0
Cum % 7.6 13.0 17.6 22.3 26.9 31.1 34.9 38.7 42.0 100.0

At first glance, this looks unhelpful. But of 238 data points, most were
counts of 1 or 2. A full Pareto would be very flat.

Therefore after the first cumulative 42% of defects (100) , the balance
of defects (138) are blocked together as others.

## This enables us to see that a top 9 of defects can be analysed - most

are S-clip problems (links between ICs and PCB)

5 Pareto Analysis
Pareto Analysis
Examples
Example 4 : an extra dimension to Pareto charts - cut defects across another
variable - eg work shift:

## Pareto Chart for Flaws

Day Evening Scratch

15 15

Peel
Count

Count

10 10

5 5

Other
0 0

Night Weekend
Smudge

15 15
Count

Count

10 10

5 5

0 0

6 Pareto Analysis
Pareto Analysis
How it helps
Pareto Analysis is a useful tool to:

## identify and prioritise major problem areas based on frequency

of occurrence;

separate the vital few from the useful many things to do;

## The technique is often used in conjunction with Brainstorming and

Cause and Effect Analysis.

HINT !
The most frequent is not
always the most important! Be
aware of the impact of other
causes on Customers or goals.

References
ASG aTQ training module 7.4 : Measure /Analyse - Pareto & Cause-
Effect Revisited

7 Pareto Analysis