Project Management

Pareto Diagram

last edited by: Alexandre Costa on Aug 18, 2019 3:03 AM login/register to edit this page

A Pareto diagram is a vertical bar chart that identifies the critical few from the uncritical many: A histogram, ordered by frequency of occurrence, that shows how many results were generated by each identified cause.

Pareto diagrams are used to identify the vital few sources that are responsible for causing most of a problem’s effects. The categories shown on the horizontal axis exist as a probability distribution that accounts for 100% of the observations. The relative frequencies of each specified cause listed on the horizontal axis decrease in magnitude until a default source named “other” accounts for any non-specified causes. Typically, the Pareto diagram will be organized into categories that measure either frequencies or consequences.

It is based on the 80/20 rule: 80 percent of the problem is caused by 20 present reasons. It helps focus attention on the most critical issues and prioritizes potential causes of the problem. This technique has remarkable advantages:

  1. Organizational Efficiency and the focus on the prioritized problem.
  2. Enhanced Problem-Solving Skills.
  3. Improved Decision Making

Below are the steps for creating a Pareto Charts.

  1. Decide the categories to be represented on the chart
  2. Decide the type of measurement for the vertical axis on the left.
  3. Measurements may be cost, income, defects, quantity, etc.
  4. Specify the time period for the chart (one day, one hour, one production period, etc.)
  5. Collect data for each category or use the existing data
  6. Specify the scale for measurements and organize the vertical axis on the left by using this scale.
  7. Draw the vertical bars for each category and place the highest value on the left and the lowest value on the right.
  8. Draw the cumulative curve by calculating the percentages.

  9. The most important class or category is represented by the biggest bar which is on the left. The least important category is symbolized by the smallest bar which is on the right. In other words, the bars on the left are more important than the bars on the right.

    There is a cumulative percentage line in The Pareto Chart which helps to analyze the effect of each category. The slope of the cumulative percentage line changes based on the importance of each category.
    To make the use of pareto diagrams more effective, you can make use of the 5 why technique, which will make it easier to find the root causes of the problems.

    5 Whys is an iterative interrogative technique used to explore the cause-and-effect relationships underlying a particular problem. Main goal of the technique is to determine the root cause of a defect or problem by repeating the question "Why?". Each answer forms the basis of the next question. The "5" in the name derives from an anecdotal observation on the number of iterations needed to resolve the problem.

    Not all problems have a single root cause. If one wishes to uncover multiple root causes, the method must be repeated asking a different sequence of questions each time.

    The method provides no hard and fast rules about what lines of questions to explore, or how long to continue the search for additional root causes. Thus, even when the method is closely followed, the outcome still depends upon the knowledge and persistence of the people involved.

last edited by: Alexandre Costa on Aug 18, 2019 3:03 AM login/register to edit this page

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