Pareto Analysis

Dr. Himanshu Hora

SRMS College of Engineering & Technology

Bareilly (INDIA)

Introduction

• 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

• Works on principle of “the vital few and the trivial many”

History

• Named after Vilfredo Pareto, an Italian economist and

sociologist who lived from 1848 to 1923

• In 1906, He created a mathematical formula to describe

the unequal distribution of wealth in his country,

observing that twenty percent of the people owned

eighty percent of the wealth

Pareto Analysis: Procedure

1. Gather data on the frequency

of the causes

2. Rank the causes from the

most to the least important, and

calculate the cumulative

percentage

Causes Percentage of Total

Cumulative Percent

A 20% 20%

B 18% 38%

C 15% 53%

D 11% 64%

E 10% 74%

F 6% 80%

G 6% 86%

H 6% 92%

I 5% 97%

J 3% 100%

Pareto Analysis: Procedure

3. Plot with the different causes on the x-axis, ordered

from the most to least frequent, and the percentages on

the y-axis, from 0 to 100%. Construct a bar graph based

on the percentage of each cause

4. Construct a line graph of the cumulative percent

Pareto Analysis: Procedure

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Pareto Analysis: Procedure

5. Draw a line from 80% on the y-axis (of cumulative percent)

to the line graph that is parallel to the x-axis, and then drop

the line down to the X axis. This line separates the important

causes from the trivial ones

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Pareto Analysis: Example

Mr. X is trying to determine why his clinic has been reaching such

a small proportion of its eligible clients.

In carrying out the exercise, he forms a team. The team will first

identify the primary reason why users are not using the services.

They will then establish the causes for the problem and define a

strategy and a plan of action for solving it.

The objective of the process will be to improve the quality of the

services offered.

Pareto AnalysisStep 1. Frequency analysis

Possible Causes of Long Waiting Time Percent of total

(A) Policies require excess information on users 1

(B) Policies require complicated procedures 1

(C) Too much paperwork 2

(D) Not enough funding 2

(E) Inadequate schedules 13

(F) Inadequate policies 2

(G) Clinic personnel have too many chores at home 2

(H) Clinic personnel have other jobs 2

Pareto Analysis(H) Clinic personnel lack punctuality 6

(I) Clinic personnel have insufficient training 2

(J) Clinic personnel aren't motivated 1

(K) Clinic personnel are careless 1

(L) Clinic personnel don't follow the schedule 16

(M) Users forget ID cards 1

(N) Users don't keep appointments 2

(O) Delay in handing over lab results to doctors 14

(P) Outdated methods 12(Q)Lack of automation 9(R) Procedures take too long 11

Pareto AnalysisStep 2. Ranking causes

Cause Percentage Cumulative %

(L) Clinic personnel don't follow the schedule 16 16

(O) Delay in handing over lab results to doctors 14 30

(E) Inadequate schedules 13 43

(P) Outdated methods 12 55

(R) Procedures take too long 11 66

(Q) Lack of automation 9 75

(H) Clinic personnel lack punctuality 6 81

(C) Too much paperwork 2 83

Pareto Analysis(D) Not enough funding 2 85

(F) Inadequate policies 2 87

(G) Clinic personnel have too many chores at home 2 89

(H) Clinic personnel have other jobs 2 91

(I) Clinic personnel have insufficient training 2 93

(N) Users don't keep appointments 2 95

(A) Policies require excess information on users 1 96

(B) Policies require complicated procedures 1 97

(J) Clinic personnel aren't motivated 1 98

(K) Clinic personnel are careless 1 99

(M) Users forget ID cards 1 100

Pareto AnalysisStep 3. Construct a bar graph based on the

percentage of each cause

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Pareto AnalysisStep 4. Construct a line graph based on cumulative %

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Pareto AnalysisStep 5. Pareto Diagram

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Pareto AnalysisInterpretation of results

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Approximately 7 factors are responsible for 80% of the waiting time problem. The other 12 factors are responsible for only 20% of the said problem.

Benefits

• Solves efficiently a problem by the identification and the ranking, according to their importance, of the main causes of the faults

• Shows where to focus efforts

• Allows better use of limited resources

• Enhances problem-solving skills

• Improves decision making

References• http://en.wikipedia.org/wiki/Pareto_analysis

• http://www.projectsmart.co.uk/pareto-analysis-step-by-step.html

• http://thequalityportal.com/q_know03.htm

• http://www.managers-net.com/paretoanalysis.html

Thank You

Dr. Himanshu Hora

SRMS College of Engineering & Technology

Bareilly (INDIA)