2.5.2 – Using Pareto Charts to Prioritize Process Improvement Efforts
Pareto charts allow you to gather data about the problems you are examining and present graphic representation of the frequency or size of each problem. This provides a way to identify those problems that offer the greatest opportunities for improvement.
The Pareto chart is based on the idea known as the 80-20 Rule: that 80 percent of any result can be attributed to 20 percent of the activities. For example, of 100 errors, 80 can be eliminated by correcting only 20 percent of the causes. The Pareto chart allows you to present your cause data so you can prioritize the causes on which you will focus. It also guides you away from choosing solutions that will worsen the existing situation.
A Pareto chart gives you a different type of information than other ProcessModel analyses provide. Typically, a ProcessModel identifies 1) processing bottlenecks, 2) interdependency problems, 3) resource constraints, 4) cycle time problems, and 5) non-determinate processes. In contrast, a Pareto chart 1) identifies how significant each contributing cause is in a situation, and 2) gives you a visual format to show that relative significance to other people.
Analyzing a Situation with a Pareto chart
The basic steps for analyzing a situation with a Pareto chart are:
1. Identify the general problem area you want to investigate and, within that problem, select the specific issues you will analyze.
2. Choose the most useful unit of measurement (such as frequency or cost) for your data collection.
3. Choose the time period for your data collection.
4. Gather current data or review historical data.
5. Compare the relative frequency or cost of each problem category.
6. Set up a Pareto graph by placing the problem categories on the horizontal line and the frequencies on the vertical line. Include the unit of measurement in the chart labels.
7. (Optional) Draw a cumulative percentage line showing the portion of the total that each problem category represents.
8. Interpret the results. Ask: What factor has the most impact on the goals of our business and customers? Remember that the most frequent or most expensive factor is not always the most important.
Variations of the basic Pareto chart can provide additional information by displaying the basic data in different ways. Frequently used variations include:
• Major Cause Breakdowns—Break down the tallest bar (i.e. often the cause with greatest effect) into subcauses in a second, linked Pareto.
• Before and After Comparisons—Draw “new” Pareto bars side by side with the original Pareto to show the effect of a change. Present the comparison as one single chart or two separate charts.
• Data from Multiple Sources—In side-by-side Pareto Charts, show data you have collected on the same problem but from different departments, locations, equipment, and so on.
• Data in Different Measurement Scales—Use the same categories, but measure your results differently. For example, compare the measurement of cost and frequency for the same categories.