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    Pareto Analysis Step by Step

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    Mary Karmacharya
    Pareto analysis is a technique used to determine which causes contribute most significantly to an effect. It is based on the Pareto principle (also known as the 80/20 rule), which states that roughly 80% of the effects come from 20% of the causes. To conduct a Pareto analysis, causes are arranged in descending order of frequency and a cumulative count is calculated. This is then plotted on a chart with the cumulative percentage on one axis and the causes on the other. A line is drawn at the 80% mark to identify the "vital few" causes that contribute most significantly and should be the focus of improvement efforts. Pareto analysis helps identify where efforts will be most effective in achieving the greatest results.

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    Pareto Analysis Step by Step

    Uploaded by

    Mary Karmacharya
    54 views3 pages
    Pareto analysis is a technique used to determine which causes contribute most significantly to an effect. It is based on the Pareto principle (also known as the 80/20 rule), which states that roughly 80% of the effects come from 20% of the causes. To conduct a Pareto analysis, causes are arranged in descending order of frequency and a cumulative count is calculated. This is then plotted on a chart with the cumulative percentage on one axis and the causes on the other. A line is drawn at the 80% mark to identify the "vital few" causes that contribute most significantly and should be the focus of improvement efforts. Pareto analysis helps identify where efforts will be most effective in achieving the greatest results.

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    PARETO ANALYSIS STEP BY STEP

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    Pareto analysis is a technique used to determine which causes contribute most significantly to an effect. It is based on the Pareto principle (also known as the 80/20 rule), which states that roughly 80% of the effects come from 20% of the causes. To conduct a Pareto analysis, causes are arranged in descending order of frequency and a cumulative count is calculated. This is then plotted on a chart with the cumulative percentage on one axis and the causes on the other. A line is drawn at the 80% mark to identify the "vital few" causes that contribute most significantly and should be the focus of improvement efforts. Pareto analysis helps identify where efforts will be most effective in achieving the greatest results.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    54 views3 pages

    Pareto Analysis Step by Step

    Uploaded by

    Mary Karmacharya
    Pareto analysis is a technique used to determine which causes contribute most significantly to an effect. It is based on the Pareto principle (also known as the 80/20 rule), which states that roughly 80% of the effects come from 20% of the causes. To conduct a Pareto analysis, causes are arranged in descending order of frequency and a cumulative count is calculated. This is then plotted on a chart with the cumulative percentage on one axis and the causes on the other. A line is drawn at the 80% mark to identify the "vital few" causes that contribute most significantly and should be the focus of improvement efforts. Pareto analysis helps identify where efforts will be most effective in achieving the greatest results.

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    PARETO ANALYSIS STEP BY STEP

    ~ By Duncan Haughey

    Pareto Analysis is a statistical technique in decision-making used for the


    selection of a limited number of tasks that produce significant overall
    effect. It uses the Pareto Principle (also known as the 80/20 rule) the
    idea that by doing 20% of the work you can generate 80% of the benefit
    of doing the entire job. Take quality improvement, for example, a vast
    majority of problems (80%) are produced by a few key causes (20%).
    This technique is also called the vital few and the trivial many.

    In the late 1940s Romanian-born American engineer and management


    consultant, Joseph M. Juran suggested the principle and named it after Italian
    economist Vilfredo Pareto, who observed that 80% of income in Italy went to
    20% of the population. Pareto later carried out surveys in some other countries
    and found to his surprise that a similar distribution applied.

    We can apply the 80/20 rule to almost anything:

     80% of customer complaints arise from 20% of your products and


    services.
     80% of delays in the schedule result from 20% of the possible causes of
    the delays.
     20% of your products and services account for 80% of your profit.
     20% of your sales force produces 80% of your company revenues.
     20% of a systems defects cause 80% of its problems.

    The Pareto Principle has many applications in quality control. It is the basis for
    the Pareto diagram, one of the key tools used in total quality control and Six
    Sigma.

    In PMBOK, Pareto ordering is used to guide corrective action and to help the
    project team take steps to fix the problems that are causing the greatest number
    of defects first.

    Pareto Analysis
    Here are eight steps to identifying the principal causes you should focus on,
    using Pareto Analysis:

    1. Create a vertical bar chart with causes on the x-axis and count (number of
    occurrences) on the y-axis.
    2. Arrange the bar chart in descending order of cause importance that is, the
    cause with the highest count first.
    3. Calculate the cumulative count for each cause in descending order.
    4. Calculate the cumulative count percentage for each cause in descending
    order. Percentage calculation: {Individual Cause Count} / {Total Causes
    Count}*100
    5. Create a second y-axis with percentages descending in increments of 10
    from 100% to 0%.
    6. Plot the cumulative count percentage of each cause on the x-axis.
    7. Join the points to form a curve.
    8. Draw a line at 80% on the y-axis running parallel to the x-axis. Then drop
    the line at the point of intersection with the curve on the x-axis. This point
    on the x-axis separates the important causes on the left (vital few) from
    the less important causes on the right (trivial many).

    Fi
    gure 1: Pareto Analysis Diagram

    Here 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
    focussed to achieve the greatest improvement. In this case, we can see that
    broken links, spelling errors and missing title tags should be the focus.

    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 for your project,
    only 20% are crucial. That 20% produces 80% of your results. Identify, and
    focus on those things first, but don't entirely ignore the remaining 80% of the
    causes.

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