The Pareto Chart (Page 2 of 3)

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A pareto chart offers the following benefits: 1) it helps the team focus on the problems or causes of problems that have the greatest impact; 2) it displays the relative significance of problems or problem causes in a simple, quick-to-interpret, visual format; and 3) it can be used repeatedly in cycles to produce continuous improvements systematically (for each succeeding cycle, the major pareto bars are actually minor bars in the previous cycle).  

To construct a pareto chart, the following steps are recommended:

1)  choose a problem that needs to be addressed;

2)  identify the causes of the problem based on existing data and through brainstorming;

3)  decide on how these problem causes will be monitored for the data collection for the pareto chart, e.g., frequency of occurrence?, cost?, etc.;

4)  define the duration and time frame of the data collection - it should be long enough to provide meaningful information about the real situation;

5)  conduct the data gathering according to the defined time frame, e.g., monitor the frequency of occurrence or cost impact of each problem cause encountered, ensuring that causes not identified earlier for monitoring must still be counted in a catch-all bin ('Others' category);

6)  tabulate the problem causes in order of decreasing frequency, and assign a column each for: a) the frequency of occurrence (or cost impact); b) the percentage share of the cause; and c) the cumulative percentage corresponding to each problem cause (see Table 1);

7)  construct the pareto chart using the tabulated data and following the pareto chart format discussed earlier (see Figure 1);

8)  interpret the pareto chart and select the 'vital few' that need to be addressed immediately.

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