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 Pareto Diagram / Pareto Analysis is a statistical technique in decision making. It is used the selection number of tasks that produce significant overall effect.

Pareto Diagram use Pareto Principle (known as the 80/20 rule)

It is mean by doing 20% of the work you can generate 80% of the benefit of doing the whole job. In terms of quality improvement, a large majority of problems (80%) are produced by a few key causes (20%)

A Pareto Chart has the following objectives:

Separate the few major problems from the many possible problems so we can focus on improvement efforts. Arrange data according to priority or importance Determine which problems are most important using data, not perceptions

 The Pareto Diagram named after Vilfredo Pareto, a 19th-century Italian economist. He conducted a study in Europe in the early 1900s on wealth and poverty. It is the law of the "significant few versus the trivial many. The Pareto Principle is a rule-of-thumb, which states that: 20% of the problems have 80% of the impact. The 20 percent of the problems are the vital few and the remaining problems are the trivial many.

From the quality point of view, this diagram was introduced by the professor J. M. Juran, as an instrument for the classification of the problems of quality:

1904 - 2008
Management Consultant and Engineer

A Pareto Diagram is a good tool to use when the process investigated produces data that are broken down into categories and you can count the number of times each category occurs.

 A Pareto diagram puts data in a hierarchical order, which allows the most significant problems to be corrected first

The Pareto analysis technique is used primarily to identify and evaluate nonconformities, although it can summarize all types of data.

Common examples:
80% of all car accidents are caused by 20% of drivers 80% of global wealth is held by 20% of the world population 80% of the work on a project is done by 20% of team members 80% of healthcare is used by only 20% of patients

 Pareto Diagram helps teams focus on the small number of really important problems or causes of problems. This tool is useful in establishing priorities by showing which are the most critical problems to be tackled or causes to be addressed. Comparing Pareto diagram of a given situation over time can also determine whether an implemented solution reduced the relative frequency or cost of that problem or cause

 The chart is similar to the histogram or bar chart, except that the bars are arranged in decreasing order from left to right along the abscissa. Each bar represents only a category of faults, arranged in a decreasing way, from left to the right, according to their importance.

1.Record the raw data

List each category and its associated data count

2. Order the data

Prepare an analysis sheet, putting the categories in order and placing the one with the largest count first.

3. Label the left-handed vertical axis

Make sure the labels are spaced in equal intervals from 0 to a round number equal to or just larger than the total of all counts.

4. Label the horizontal axis

Make the widths of all the bars the same and label the categories from largest to smallest. An other category can be used to last to capture several smaller sets of data.

5. Plot a bar for each category

The height of each bar should equal the count for that category. The widths of the bars should be identical.

6. Determine the percentage that each category represents

To do this, total the counts (for our example, this would be 102). Next, determine the percentage for each category.

7. Find the cumulative percentage

Each categorys cumulative percentage is the percentage for that category added to the percentage of the category of the larger category before it

8. Add a cumulative line

Label the right axis from 0% to 100% and line up the 100% with the grand total on the left axis. For each category, put a dot as high as the cumulative total and in line with the right edge of the categorys bar. Connect all the dots with a straight lines.

9. Analyze the diagram

Look for a break point on the cumulative percent graph. It can be identified by a marked change in the slope of the graph. This separates the significant few from the trivial many

Histogram
A histogram is a type of bar chart showing a distribution of variables. A histogram represents each attribute or characteristic as a column and the frequency of each attribute or characteristic occurring as the height of the column.

Pareto Chart
A Pareto chart is a specific type of histogram that ranks causes or issues by their overall influence. A Pareto chart assists in prioritizing corrective actions as the issues with the greatest impact are displayed in order. In addition, the Pareto chart includes an arc representing the cumulative percentage of the causes

Example
A histogram may be used to represent the number of students who scored between a certain score range, such as 0 to 20%, 20 to 40%, etc. A Pareto chart may be used to analyze the causes of customer dissatisfaction. The causes would be ordered by frequency of occurring, allowing the team to focus on those issues with the biggest impact on customer satisfaction.

Summary
A histogram is a bar graph that illustrates the frequency of an event occurring using the height of the bar as an indicator. A Pareto chart is a special type of histogram that represents the Pareto philosophy (the 80/20 rule) through displaying the events by order of impact.

 Solves efficiently a problem by the identification and the hierarchisation, according to their importance, of the main causes of the faults. Sets the priorities for many practical applications. Some examples are: process improvement efforts for increased unit readiness, customer needs, suppliers, investment opportunities. Shows where to focus efforts. Allows better use of limited resources.

 The Pareto chart is one of the seven basic tools of quality control.
Pareto analysis provides the mechanism to control and direct effort by fact, not by emotion. It helps to clearly establish top priorities and to identify both profitable and unprofitable targets. Maximize research and product development time