What is

Pareto chart - explanation and definition of Pareto

What is Pareto chart

The Pareto chart is an analysis tool that helps you make decisions in terms of priorities, the chart is based on the principle enunciated by Vilfredo Pareto:

"80% of the problems can be solved if 20% of the underlying causes are eliminated".

In other words, 20% of vital mistakes cause 80% of the problems, or what is the same: at the origin of a problem, always found a 20% vital causes and 80% of trivial.

It is so stated in the preceding paragraphs that also Pareto chart is also known as a rule 80-20 or also by "vital few and trivial many".

The Pareto chart is a particular case of the bar graph, in which the bars representing the factors corresponding to any quantity are ordered from largest to smallest (in descending order) and from left to right.

This empirical principle that occurs in all areas of life such as economic (most of the wealth is concentrated in a few people), geographic (most of the population lives in a small part of the territory), etc. is applied to the analysis of problems understanding that there are a few factors (or causes) that cause most of a problem.

Specifically this type of diagram is used primarily to:

  • Knowing which is the most important factor or factors problem.

  • Determine the root causes of the problem.

  • Decide the aim of improving and elements that need improvement.

  • Knowing if has achieved the desired effect (compared to the initial Pareto).

Mode of application of Pareto chart

In order to successfully perform a Pareto chart we perform the following steps:

  • Collect data and sort them by categories

  • Sort categories Descending indicating the number of times it has occurred.

  • Calculate individual and cumulative percentages of each category were calculated by summing the cumulative percentages prior to the selected category.

  • Construction chart according to the data previously obtained.

Generation of Pareto chart

The chart is a graphic that contains the categories on the horizontal axis and two vertical axes, the left one with a magnitude proportional to the measured (total value of the data) and the right to a percentage scale the same size scale.

Bars high to low and from left to right are placed, but putting last corresponding to other bar (although not the lowest).

Are marked on the graph with a point each cumulative percentages (the points can be located in the center of each of the categories or in the area where they meet each other) and the points are connected by straight lines.

Are separated (by a broken straight line, for example) the few categories that contribute to most of the problem. This will be done at the point where the cumulative percentage add between 70% and 90% of the total (usually at this point the line is a major change of inclination).

Interpretation of Pareto chart

Sometimes it is generally the case that there be a clear border between the few major categories and others. Appears what some authors call the "gray zone", which starts in the area around 50% and ends on 80% .When this happens in these cases, it is recommended not to consider the categories of the gray zone and focus on the 50-60% that contributes to effect or problem being analyzed.

It can also happen, representing a Pareto chart, which does not appear meaningful categories, but all contribute Similar to the effect (Pareto plane). This is usually a symptom of inadequate choice of stratification factors as the effect studied is the same in any factor.

When the Pareto chart is used for problem solving is appropriate to analyze the effect (problem) under different viewpoints, so that the various charts that result can provide guidance on priorities for the solution.

Depending on the characteristics of the problem and the direction that leads the team stratification or another be chosen, but you should always make a Pareto chart of costs, since this is an important factor in most organizations criterion.

Using the Pareto chart is continuous and iterative, because once solved the few important factors, further analysis revealed that some of those in the above analysis were less important have become vital.

what is pareto chart