October 2003

Vol. 5, No. 10

Quality Quiz
from Professor Cleary

You're right!


A description of Pareto analysis, taken from Practical Tools for Continuous Improvement, and a Pareto chart from the same data appears below. One thing seems to be eminently clear: Dan E. Boiy is a long way from getting a Black Belt.

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A Pareto diagram is a simple bar chart that ranks items in decreasing order of occurrence. The purpose of a Pareto diagram is to separate the significant aspects of a problem or issue from those that are trivial. The Pareto diagram is graphical and similar to a histogram, except that it monitors items rather than numbers. The diagram is based on the principle that there is an unequal distribution of items in the universe. It is the law of “the significant few versus the trivial many.”

For example, there are often many causes of a problem or issue; however, only some of these are significant. This is known as the 80/20 rule—that the significant few items make up 80 percent of the problem or issue, while the trivial many will make up about 20 percent. A Pareto diagram is used to identify the significant few items. Vilfredo Pareto, an Italian economist and sociologist who conducted a study in Europe in the early 1900s on wealth and poverty, first developed this principle. Pareto found that wealth was concentrated in the hands of the few and poverty in the hands of the many. Pareto’s principle was named and popularized by Joseph M. Juran in the late 1940s. It was Juran who made the principle a universal concept.

A Pareto diagram, one of the most useful analytic tools, can easily be applied in any industry or setting. It can be used to analyze the causes of a problem or issue, to study the results of a change in a process or system, and to plan for continuous improvement. A Pareto diagram can be used to stratify (divide) data to identify the most significant aspects of a problem or issue. Theories for improvement can then be generated to reduce the significant aspects. After trying improvement theories, new Pareto diagrams can be used to see if these theories have worked. At this point, the larger bars in the first Pareto diagram should be smaller than they were. For continuous improvement, use the new diagram to make plans to reduce the “new” largest bars.

Dan E. Boiy’s Pareto chart can graphically represent the significant sources of defects, in order to address those sources.

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