Pareto Chart Analysis: When & How to Use It?

Pareto chart commonly referred to as quality improvement tool, is based on the Pareto Principle that 80% of outcomes can be predicted based on 20% of inputs. It works well for setting priorities and driving continuous improvements by providing insights on the frequency of the quality issues and their root cause. 

By using Pareto Chart, you can: 

• Identify problems/issues according to their cause or details, such as: 
• Information such as defect type, place, position, approach, process, and time. 
• Cause such as tools utilized, project execution, client communications, resources, etc. 
• Find out what causes the most problems and what makes them worse. 
• Select a problem or cause of a quality issue to focus on first. 
• Chart the improvement before and after to understand the effectiveness of the solution. 

Pareto charts reflect the theory that the few most significant defects account for most of the overall problem. Thus, Pareto charts help find the systemic flaws that contribute most to the cumulative effect of the issues. 

What is the Purpose of the Pareto Chart? 

With the Pareto chart, you can highlight critical elements of a (typically large) set of factors. For instance, in quality control, a Pareto chart may often represent the source of the most defects, the most frequently occurring defect type, or the most frequent basis for customer complaints, among others. 

The Pareto Chart analysis is used in industries including lean manufacturing, automobiles, food and beverage, and more to focus on core improvement areas. 

Pareto Chart Analysis: When to Perform It? 

You can use the Pareto Chart Analysis, especially when you want to: 

• Analyze the frequency of problems in a specific process 
• You want to focus on the most prominent issue or cause out of many 
• Have a closer look at the highlights of root causes 
• Communicate your findings 

Pareto Chart Analysis: How to Perform It 

Next, we will see how to perform a Pareto analysis: 

Identify and list your problems 

Identify all the issues you need to resolve and make a list. Gather feedback from team members and clients, where possible. You could do it through surveys, formal complaints, or helpdesk logs. 

Identify the Root Causes for Each Problem 

To solve each problem, you must first identify its root cause. A combination of a 5 Whys analysis, Cause-Effect Analysis, and Root Cause Analysis is a valuable tool. 

Related Article: Explain the Five-Why Analysis to Determine Root Cause(s)?

Assign Scores to your problems based on the severity 

Now, rate the importance of each of the problems you listed. It usually depends on what you are looking to solve. 

Organize your problems together 

You can group problems by a common cause you identified in Step 3 by utilizing the root cause analysis. For example, three of your problems are caused by an inadequate calibration of tools. In that case, these three problems can be grouped. 

Calculate the total score for each group 

Sum up the scores for each group you identified. Once again, it would be best to prioritize the groups with the highest scores, and those with the lowest scores should be the lowest. 

Be proactive 

Now is the time to act! If you solve the highest-scoring problem first, you will likely reap the most significant rewards. So, think of innovative solutions to your highest scoring problem first. 

It might not be worth making a fuss over the lowest-scoring problems, especially if they are expensive to fix. Instead of wasting energy and resources on unimportant things, use Pareto Analysis! 

Pareto Chart Analysis: Benefits to Expect 

The concept of the Pareto Chart affects numerous business and economic factors, including financial performance, process improvements, and customer retention. However, the real benefits come in the form of its ability to help companies identify their most significant assets and maximize their value.  

Some of the benefits of using Pareto Chart Analysis: 

1. Improved Decision Making: By identifying the immediate causes for change, businesses can prepare their departments and team members to adapt and deal with the changes quickly. 
2. Overall Improvement of Organization: Allows management to prioritize tasks and solve problems more efficiently by focusing on the most critical aspects of the job. 
3. Better Problem Solving: Locates the root causes of problems and understands how to take better action. 
4. Resource Reallocation: You can reallocate resources using productivity and time management tools to achieve business objectives efficiently and effectively. 
5. Market Optimization: Research top-performing products and create marketing campaigns for specific audiences. 

Example of Pareto Chart Analysis 

An example could be an error that caused due to a part being made that does not fit into a machine assembly as expected:  

In the above example, the scores are assigned, out of 10, based on severity. The highest scoring cause will be managed on priority, while similar scoring can be grouped and worked together. 

Unfortunately, without a tool to capture, detect, and eliminate such problems, such work is cumbersome, labor-intensive, and prone to mistakes. However, you can manage such root cause analysis using advanced CAPA Management Software like Qualityze CAPA Management. 

Qualityze CAPA Management solution is specifically designed to manage systemic issues and prevent recurrence in the future effectively. 

Quality tools like Pareto Chart Analysis, which are built-in as a part of the Qualityze CAPA Management module, help you perform root cause analysis quickly and efficiently. In addition, CAPA Management Software’s intuitive user interface and configurable workflows make the transition from traditional CAPA processes to a powerful tool simple. 

You can also integrate Qualityze CAPA Management with existing business applications to identify, manage, investigate, and eliminate quality problems using different root cause analysis tools with confidence and accuracy. 

Key Observations 

Using Pareto Analysis, you can evaluate and prioritize various problems or tasks by comparing the benefits of each. 

It represents the Pareto Principle (also known as the 80/20 Rule) – the theory that 80 percent of problems are caused by just 20 percent of causes. 

It is necessary to list all of the problems you face and the root causes before using Pareto Analysis. Then, once you have identified each issue, you should score it according to its severity (the scoring system you rely on will depend on what kinds of problems you are trying to handle). 

For each cause, group problems by score. This will allow you to identify the issues that will have the most prominent benefits if resolved. 

Finally, use the information you have collected to prioritize your workload so that you can devote more time to improving the issues that matter most and less time to problems that do not. 

However, you can make the best of this technique by integrating it with an advanced CAPA management System.

If you want to know how, get in touch with our customer success team on 1-877-207-8616 or write to us at info@qualityze.com, and we will be right there for you.