Pareto chart

Description:

A Pareto Diagram is used to prioritize direction and focus on the vital few instead of
targeting all the categories. The graph is a column graph where all categories are normally on the
x-axis and add up to represent 100% accumulation of all the categories. The left vertical axis is
the number of instances in category. The vertical column on the right is the percentage that
category contains out of all the instances.

How to use Pareto Chart A Pareto Chart is a good tool to use when the process you are
investigating produces data that are broken down into categories and you can count the number
of times each category occurs.

No matter where you are in your process improvement efforts, Pareto Charts can be helpful, “. . .
early on to identify which problem should be studied, later to narrow down which causes of the
problem to address first. Since they draw everyone's attention to the ‘vital few’ important factors
where the payback is likely to be greatest, (they) can be used to build consensus. In general,
teams should focus their attention first on the biggest problems—those with the highest bars”.

Making problem-solving decisions isn’t the only use of the Pareto Principle. Since Pareto Charts
convey information in a way that enables you to see clearly the choices that should be made;
they can be used to set priorities for many practical applications in your command. Some
examples are:
 Process improvement efforts for increased unit readiness
 Skills you want your division to have
 Customer needs
 Suppliers
 Investment opportunities
How to use Pareto Chart

Before getting started, you may also want to take a look at Performing a Pareto Analysis in
Excel to get a better idea about how a Pareto chart is used. To begin, input the data from your
project research into a table, which we'll use to create a chart in Excel. This doesn’t have to be a
“fancy” table, but it does need to contain information on Count, Percent of Total, and
Cumulative Percent as shown in the screenshot below. We actually won’t use the Count column
to create the Pareto chart, but it is needed to calculate the other figures so we’re including it in
this example. 

After the data has been entered, select the columns containing the information related to the
Problem, Percent of Total, and Cumulative Percent. If your data is in non-adjacent columns, like
in our example here, hold down the Ctrl key in order to select multiple items at once. With the
data still selected, click on the Insert tab of Excel’s main toolbar. From the Charts group on this
tab, select Column and then pick the first entry (Clustered Column) of the 2-D Column choices.
At this point, your chart should look like the one below. It doesn’t quite look like a Pareto chart
yet, but don’t worry – we still have some changes to make.
Modifying the Pareto Chart

Next, right-click on one of the bars representing the Cumulative Percent data. From the options
menu that appears, choose Change Series Chart Type.

This option will let us represent the Cumulative Percent data as a line while leaving the Percent
of Total as a bar representation. When the Change Chart Type window appears (see screenshot
below), choose the first option in the Line category.
Now, things are starting to look a little better.

The next thing we want to do is define our data ranges. Excel provides some default ranges, but
we know that our Percent of Total and Cumulative Percent will never be more than 100. Right-
click anywhere over the numbers making up the vertical axis, and select the Format Axis option.
Change the Maximum field in the Axis Options category to Fixed and then enter the number 100
in the adjacent box.

We still have some work to do to make our chart pretty, but now the fundamentals are in place.

To get rid of the extra items showing up on the chart legend, right-click on the legend and choose
the Select Data option.
In the Select Data Source window that appears, click on each of the Legend Entries that are
marked as <blank series> and Remove them from the list.

After doing this, your chart should look like the screenshot below.
The only thing left to do now is to add a title and to make cosmetic changes to enhance the
appearance of the chart. These things are completely optional, and the number of changes you
wish to make at this point is entirely up to you.

The Pareto chart shown in the screenshot to the left is just one example of the formatting changes
that you can apply to make your final exhibit have a little added visual appeal. If you would like
to download this file and use it as a template for your own project, it can be found in the Project
Management Media Gallery under the title How to Make a Pareto Chart in Excel – Sample
Pareto Chart.
Pareto chart Example

Below is a table from a manufacturing process that charted all of their quality problems.
While the original defect chart listed many problems at various stages of the process, the overall
problems were grouped into five main process areas. In the left column is the name of the
process where the defects occur. In the next column is the amount of defects recorded from their
daily check sheets, recorded during a one week period. In the third column is the percent of
defectives from the overall production (N = 2165). In the fourth and final column, is the percent
of the total defects. That is, for example, of all the defects recorded (416), poor Caulking is
47.6% of the entire problem. It should be obvious then, where the primary problem is and what
should be focused upon first. 

From the chart above (figure 1), you can now create a Pareto chart in which you can
graphically display the quality problems. There is special software on the market that makes
Pareto diagrams; however, an Excel barchart will basically create the same display. The below
bar chart reflects the above information charted in Excel.
Pareto Example 
The left vertical axis (border) shows the number of defects for each defective category, and the
right vertical axis shows the percentage of each defect of the total defects. The horizontal axis
(bottom) lists the defective items starting with the most frequent one on the left (Caulking),
progressing over to the least frequent occurrence on the right side (Torque). Therefore, the
Pareto diagram visually indicates which problem should be solved first, or in this case, the
Caulking problem. With this bar graph, it is easier to see which defects are most important of
all the defects that exist. If we solve all or most of the problems in Caulking, it could affect
some of the problems observed in connecting, gapping, fitting, and torque.

During the "brain-storming" session (we'll cover this later), it is wise to ask, "Does the
Caulking problem have any impact on the other problems listed?" In some cases it might. If
there was proper caulking, would part of the "Gapping" problem be eliminated?" If there were
proper caulking, would the "Torque" have a better value and thus not be part of the defects?

Sometimes your major problems have impact on the smaller problems. Several problem areas
may all be attributed to ONE ROOT CAUSE, even though several failure modes are observed.
For this reason, it is always wise to choose the most frequent problem first.
Reference
http://www.saferpak.com/pareto_articles/howto_pareto.pdf
http://personnel.ky.gov/NR/rdonlyres/D04B5458-97EB-4A02-BDE1-
99FC31490151/0/ParetoChart.pdf
http://thequalityweb.com/pareto.html