Step by step pareto analysis

1. Lesson 1
Pareto Analysis

2. PARETO ANALYSIS
Developed by Alfredo Pareto (1848-1923)
Study the distribution of wealth in Europe.
Juran coined the phrase:-
“Vital Few and Trivial Many”
Pareto diagram a graph that ranks
classifications in descending order from left
to right.
Vital Few - left
Trivial Many- right

4. Steps to Pareto Analysis
1. Arrange data in descending order
2. Calculate “percentage” for each problem
3. Calculate cumulative percentage
4. Plot individual problems (sources)on x axis
(histogram/ bar chart) – IMPORTANT: Start with
highest on the left hand side
5. Plot individual values related to each problem
(source) on left side y axis
6. Plot cumulative percentages in ascending order on
the right hand side y axis
7. Draw the cut-off line at 80%

5. PARETO ANALYSIS EXAMPLE
In a customer satisfaction survey at a local fast-food restaurant,
the following complaints were lodged:-
Complaint # of complaints
Cold food 105
Flimsy utensils 2
Food tastes bad 10
Salad not fresh 94
Poor Service 13
Food to greasy 9
Lack of Courtesy 2
Lack of cleanliness 25

6. Cold food 105
Salad not fresh 94
Lack of cleanliness 25
Poor Service 13
Food tastes bad 10
Food to greasy 9
Flimsy utensils 2
Lack of Courtesy 2
Arrange data in descending order

7. Cold food 105 40% 40
Salad not fresh 94 36% 76
Lack of cleanliness 25 10% 86
Poor Service 13 5% 91
Food tastes bad 10 4% 95
Food to greasy 9 3% 98
Flimsy utensils 2 1% 99
Lack of Courtesy 2 1% 100
Problem Sources Actual Percentage Cumulative

8. 0
50
100
150
1 2 3 4 5 6 7 8
Percentage
#ofComplaint
Complaint
Pareto Analysis

9. Final Step to Pareto Analysis
• State your conclusion and make recommendations as
follows:
- Mention that Pareto is based on the 80/20 principle and
explain what this means (i.e. 20% of the problem
sources are responsible for 80% of all problems or
complaints)
- By addressing this 20% (approximate), management
can solve approximately 80% of the problems, therefore
management should start addressing quality problems in
the order demonstrated by the Pareto analysis
- List the problems that need to be addressed
- State that these are the vital few, while the others many
be considered the trivial many.