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.

As a basic Quality Improvement tool, Pareto Analysis can:

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.

2. Rank the contributions to the problem in order of frequency.

3. Draw the value (errors, facts, etc) as a bar chart.

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:

Fault by Main Cause

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;

identify major causes and effects.

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