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What is Pareto Analysis?

Pareto Analysis
What is it?
The Pareto Principle states that only a "vital few" factors are responsible for producing most of the problems. This principle can be applied to quality improvement to the extent that a great majority of problems (80%) are produced by a few key causes (20%). If we correct these few key causes, we will have a greater probability of success.

Who uses it?
The team, the manager.

Why use it?
For the team to quickly focus its efforts on the key causes of a problem.

When to use it?
After doing a cause-and-effect analysis, to count the frequency of different causal factors, and to identify problems.

How to use it:
Gather data on the frequency of the causes using a tally sheet.
Rank the causes from the most to the least important, and calculate the cumulative percentage (the cumulative percentage is the first percentage plus the second percentage, and so on).

Causes Percentage
of Total Computation Cumulative Percent
A 20% 0+20%= 20% 20%
B 18% 20%+18%=38% 38%
C 15% 38%+15%=53% 53%
D 11% 53%+11%=64% 64%

Draw a horizontal axis (X) that represents the different causes, ordered from the most to least frequent.

Draw a vertical axis (Y) with percentages from 0 to 100%.

Construct a bar graph based on the percentage of each cause.

Construct a line graph of the cumulative percent.

Draw a line from 80% on the Y axis to the line graph, and then drop the line down to the X axis. This line separates the important causes from the trivial ones.

In the example below, you can see that only 6 causes out of 20 are responsible for 80% of the problem. The other 14 causes are responsible for 20% of the problem. There is a good chance that if you focus on solving the 6 key causes, the other 14 will be solved as well.

Taken from "http://erc.msh.org/quality"
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