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Digital Transformation


WHAT IS A PARETO CHART? DEFINITION & EXAMPLES

Claire Lamarre
Aug 06, 2019


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You don’t have to be a math wiz to understand what a Pareto Chart is.


WHAT IS A PARETO CHART?

A Pareto Chart is a graph that indicates the frequency of defects, as well as
their cumulative impact. Pareto Charts are useful to find the defects to
prioritize in order to observe the greatest overall improvement.

To expand on this definition, let’s break a Pareto Chart into its components.

1) A Pareto Chart is a combination of a bar graph and a line graph. Notice the
presence of both bars and a line on the Pareto Chart below.



2) Each bar usually represents a type of defect or problem. The height of the
bar represents any important unit of measure — often the frequency of occurrence
or cost.

3) The bars are presented in descending order (from tallest to shortest).
Therefore, you can see which defects are more frequent at a glance.

4) The line represents the cumulative percentage of defects.

Let’s look at the table of data for the Pareto Chart above to understand what
cumulative percentage is.

Type of DefectFrequency of Defect% of TotalCumulative % Button
Defect2339.039.0Pocket Defect1627.166.1Collar Defect1016.983.1Cuff
Defect711.911.9Sleeve Defect35.116.9Total59--

For Collar Defects, the % of Total is simply (10/59)*100.

The Cumulative % corresponds to the sum of all percentages previous to and
including Collar Defects. In this case, this would be the sum of the percentages
of Button Defects, Pocket Defects, and Collar Defects (39% + 27.1% + 16.9%).

The last cumulative percentage will always be 100%.

Cumulative percentages indicate what percentage of all defects can be removed if
the most important types of defects are solved.

In the example above, solving just the two most important types of defects —
Button Defects and Pocket Defects – will remove 66% of all defects.

In any Pareto Chart, for as long as the cumulative percentage line is steep, the
types of defects have a significant cumulative effect. Therefore, it is worth
finding the cause of these types of defects and solving them. When the
cumulative percentage line starts to flatten, the types of defects do not
deserve as much attention since solving them will not influence the outcome as
much.

5) In manufacturing, Pareto Charts are used as a quality management tool: they
help analyze and prioritize issue resolution.

The idea behind a Pareto Chart is that the few most significant defects make up
most of the overall problem. We have already covered two ways the Pareto Charts
help find the defects that have the most cumulative effect.

First, the first bars are always the tallest, indicating the most common sources
of defects. Second, the cumulative percentage line indicates which defects to
prioritize to get the most overall improvement.

6) The Pareto Principle can analyze Pareto Charts, also known as the 80/20 rule.

WATCH OUR ON-DEMAND WEBINAR: HOW TO REDUCE COST OF QUALITY WITH INDUSTRY 4.0 →



WHAT IS THE PARETO PRINCIPLE?

The Pareto Principle states that 80% of the results are determined by 20% of the
causes.

Therefore, you should try to find the 20% of defect types that cause 80% of all
defects.

While the 80/20 rule does not apply perfectly to the example above, focusing on
just 2 types of defects (Button and Pocket) has the potential to remove the
majority of all defects (66%).


APPLYING THE PARETO PRINCIPLE TO QUALITY IN MANUFACTURING

When it comes time to build Pareto Charts to analyze defects in your production
lines, you should not have to open Excel.

With the right frontline operations software, your operations can achieve
Quality 4.0 enabling real-time visualizations and reporting to be generated
automatically.




Tulip Analytics integrates all your operations’ data in one place. All your
reports and graphs — including Pareto Charts — will be displayed on dashboards
in real-time. That way, you will conduct root cause analysis for the defects
that have the most influence on your output.


BUILD YOUR OWN PRODUCTION DASHBOARD WITH TULIP

Download our Production Tracking Dashboard App from the Tulip Library to
better-analyze quality defects real-time!

Start Your 30-Day Free Trial

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