Understanding Pareto Charts

Ver. 1.0

DIYLean.com

Pareto was born July 15, 1848, and lived

until 1923. He was an Italian sociologist,
economist, and philosopher.
Pareto is chiefly known for important
contributions in the study of income
distribution in the 19th century.
Paretos law (now commonly known as the
80/20 rule) originated as a means to
express the distribution of income in
.society.

DIYLean.com

The Pareto chart, or diagram, is a special

type of histogram. In business, it is used to
illustrate the causes of a problem by making
visual the causes of a problem, in order of
severity, from largest to smallest. As such,
it is a basic statistical tool, and is one of the
foundation tools of continuous
improvement, lean, etc.

DIYLean.com

There are six basic elements involved in

putting together a Pareto chart:
1.
2.
3.
4.
5.
6.

Gather the data to be analyzed

Sort the data from largest/highest to smallest/lowest
Perform analysis steps
Produce 2-axis graph from the resulting analysis
Recolor and emphasize appropriate portions of the
graph depending on audience
Publish completed Pareto chart

DIYLean.com

Here is the story behind the example to

follow. At Costco store #156 we are looking
at the frequency of identified problems that
result in customers being stopped, and
delayed at the exit, due to discrepancies
between their receipt and what the checker
verifies as being in the basket.
Six basic error categories have been
..identified at this particular store by the
team responsible for working this.

DIYLean.com

The following data has been collected during

the month of January, 2010:
Mistake Type

Number of Occurrences

Double Charge

157

Bottom of Basket

210

Item Not Charged

330

Wrong Item Charged

102

Coupon Error

56

Item Hidden

95

DIYLean.com

For the purposes of this example we will use

Microsoft Excel to produce the Pareto chart:

For this presentation I am using

Excel 2007. You should be able to
use any spreadsheet program to
do this, including earlier versions
of Excel, OpenOffice, Lotus, etc.

DIYLean.com

Again, the first step is to gather the data:

DIYLean.com

Step two is to sort the data from high to low:

DIYLean.com

Next, total or sum the number of occurrences:

DIYLean.com

Next, total or sum the number of occurrences:

DIYLean.com

Step three involves several analysis steps:

DIYLean.com

Step three involves several analysis steps:

DIYLean.com

Step three involves several analysis steps:

DIYLean.com

Step three involves several analysis steps:

DIYLean.com

Step three involves several analysis steps:

DIYLean.com

Step three involves several analysis steps:

DIYLean.com

Step four is producing a 2-axis graph:

DIYLean.com

Step four is producing a 2-axis graph:

DIYLean.com

Step four is producing a 2-axis graph:

DIYLean.com

Step four is producing a 2-axis graph:

DIYLean.com

Step four is producing a 2-axis graph:

DIYLean.com

The final Pareto chart should look something like:

DIYLean.com

You should now have a basic understanding

of how to put together a Pareto chart to
document real-world problems like: defects,
mistakes, scrap, missed shipments, etc.
The Pareto chart is one of the most useful
tools in the lean, and continuous
improvement, toolkit. Use it often!

DIYLean.com

Understanding Pareto Charts

Ver. 1.0

DIYLean.com