A Pareto Chart is a special form of a bar graph and is used to display the relative importance of problems or conditions.
A PARETO CHART IS USED FOR:
1.Focusing on critical issues by ranking them in terms of importance and frequency (example: Which course causes the most difficulty for students? which problem with Product X is most significant to our customers?)
2.Prioritising problems or causes to efficiently initiate problem solving (example: Which discipline problems should be tackled first? or, What is the most frequent complaint by parents regarding the school? solution of what production problem will improve quality most?)
3.Analysing problems or causes by different groupings of data (e.g., by program, by teacher, by school building; by machine, by team)
4.Analysing the before and after impact of changes made in a process (example: What is the most common complaint of parents before and after the new principal was hired? has the initiation of a quality improvement program reduced the number of defectives?)
STEPS IN CONSTRUCTING A PARETO CHART WITH STEP-BY-STEP EXAMPLE:
1.Determine the categories of problems or causes to be compared. Begin by organising the problems or causes into a narrowed down list of categories (usually 8 or less).
2.Select a Standard Unit of Measurement and the Time Period to be studied. It could be a measure of how often something occurs (defects, errors, cost overruns, etc.); frequencies of reasons cited in surveys as the cause of a certain problem; or a specific measurement of volume or size. The time period to be studied should be a reasonable length of time to collect the data.
3.Collect and summarise the Data. Create a three-column table with the headings of "error or problem category", "frequency", and "percent of total". In the "error or problem category" column list the categories of problems or causes previously identified. In the "frequency" column write in the totals for each of the categories over the designated period of time. In the "percent of total" column, divide each number in the "frequency" column by the total number of measurements. This will provide the percentage of the total.
ErrorCategoryFrequencyPercent of Total
4.Create the framework for the horizontal and vertical axes of the Pareto Chart. The horizontal axis will be the categories of problems or causes in descending order with the most frequently occurring category on the far left (or at the beginning of the horizontal line). There will be two vertical axes-one on the far left and one on the far right. The vertical axis on the far-left point will indicate the frequency for each of the categories. Scale it so the value at the top of the axis is slightly higher than the highest frequency number. The vertical axis on the far right will represent the percentage scale and should be scaled so that the point for the number of occurrences on the left matches with the corresponding percentage on the right.
5.Plot the bars on the Pareto Chart. Using a bar graph format, draw the corresponding bars in decreasing height from left to right using the frequency scale on the left vertical axis. To plot the cumulative percentage line, place a dot above each bar at a height corresponding to the scale on the right vertical axis. Then connect these dots from left to right, ending with the 100% point at the top of the right vertical axis.
6.Interpret the Pareto Chart. Use common sense-just because a certain problem occurs most often doesn't necessarily mean it demands your greatest attention. Investigate all angles to help solve problems-What makes the biggest difference? What will it cost to correct the problems? What will it cost if we don't correct this problem?