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Pareto chart

Pareto chart:

The Pareto chart provides a graphic depiction of the Pareto principle, a theory maintaining that 80% of the output in a given situation or system is produced by 20% of the input.

When to use a Pareto Chart:

It is mainly used in quality management related processes. Along with quality management, this tool can also be used with other situations such as:

When you have a lot of data and you want to analyze it.
When you want to identify the main cause for most of the problems.
When communicating data with stakeholders.
When you want to prioritize tasks.
When you want to see the relative importance of data.

What are the Benefits of Pareto Analysis

The chart helps you segregate the problems and their causes.
It helps you focus on solving the few causes which are generating the maximum amount of problems.
It shows you the problems to focus and get the greatest improvement.
This chart helps visualize problems quickly, so this is a good visual communication tool as well.
Limitations of Pareto Analysis
The following are a few limitations of Pareto analysis:

The Pareto principle is a rule of thumb which is not a universal law and cannot be applied in all cases.
It does not help you find the root cause of the problem, so you will need another tool such as root cause analysis to use it effectively.
If there are many problems you may need more sub-Pareto charts to segregate, which sometimes may be cumbersome.
Though a Pareto chart can show you the frequency of a problem, it cannot show you the severity.
Pareto analysis focuses on past data which might not be significant to current or future scenarios.

How to Draw a Pareto Chart
Drawing a Pareto chart is very easy. The important step is to collect the correct data.

The steps to drawing a Pareto chart are as follows:

Select the category of causes you want to group issues in.
Determine the measure, for example, frequency, cost, time, etc.
Determine the period to collect the data; for example, one cycle, one day, or one week.
Collect the data.
Segregate the data as per their categories.
Draw a bar chart with causes on the x-axis and number of occurrences on the y-axis.
Now draw the bar with the highest number of occurrences at the far-left and label the category.
Repeat the procedure until you complete all identified categories.
The category with the lowest number of defects will be at the far-right.
The procedure to draw this line is as follows:

Find the percentage of each category.
Add the percentage of the first and second bar and put a dot on the second bar.
Now add the percentage of the third bar and place a dot at the top of the third bar.
Continue the process until all bars are covered.
Connect all the dots.
Now the cumulative sum line is drawn. Make sure that the bar at the far-right has a percentage of 100%.