Pareto analysis başak Karakaya

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  • Başak Karakaya

  • Industrial Engineering Department

  • Pareto analysis is a formal technique useful where many possible courses of action are competing for attention.

  • Pareto analysis is a creative way of looking at causes of problems because it helps stimulate thinking and organize thoughts.

  • This technique helps to identify the top 20% of causes that needs to be addressed to resolve the 80% of the problems.

  • The value of the Pareto Principle for a project manager is that it reminds you to focus on the 20% of things that matter. Of the things you do during your project, only 20% are really important. Those 20% produce 80% of your results. Identify and focus on those things first, but don't totally ignore the remaining 80% of causes.

History of Pareto Analysis

  • This method stems in the first place from Pareto’s suggestion of a curve of the distribution of wealth in a book of 1896. Whatever the source, the phrase of ‘the vital few and the trivial many’ deserves a place in every manager’s thinking. It is itself one of the most vital concepts in modern management. The results of thinking along Pareto lines are immense.


The Pareto Chart

  • A Pareto chart is a graphical representation that displays data in order of priority.

  • This is a simple example of a Pareto diagram using sample data showing the relative frequency of causes for errors on websites. It enables you to see what 20% of cases are causing 80% of the problems and where efforts should be focused to achieve the greatest improvement.

Some Problems Difficulties associated with pareto analysis

  • Misrepresentation of the data.

  • Inappropriate measurements depicted.

  • Lack of understanding of how it should be applied to particular problems.

  • Knowing when and how to use Pareto Analysis.

  • Inaccurate plotting of cumulative percent data.

Overcoming the difficulties

  • Define the purpose of using the tool.

  • Identify the most appropriate measurement parameters.

  • Use check sheets to collect data for the likely major causes.

  • Arrange the data in descending order of value and calculate % frequency and/or cost and cumulative percent.

  • Plot the cumulative percent through the top right side of the first bar.

  • Carefully scrutinize the results. Has the exercise clarified the situation?

Pareto Analysis Example

  • Ahmet has taken over a failing service center, with a lot of problems that need resolving. His objective is to increase overall customer satisfaction.

  • He decides to score each problem by the number of complaints that the center has received for each one.

  • Ahmet then groups problems together (steps 4 and 5). He scores each group by the number of complaints, and orders the list as follows:

  • Lack of training (items 5 and 6) – 51 complaints.

  • Too few service center staff (items 1 and 42) – 21 complaints.

  • Poor organization and preparation (items 3 and 4) – 6 complaints

Figure 1. Ahmet’s Pareto Analysis

  • It is the discipline of organizing the data that is central to the success of using Pareto Analysis. Once calculated and displayed graphically, it becomes a selling tool to the improvement team and management, raising the question why the team is focusing its energies on certain aspects of the problem.


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