At the end of the nineteenth century in 1897, Vilfredo Pareto, and Italian economist published his "80-20 theory" about uneven wealth distribution, showing that 80% of the
global wealth is in the hands of 20% of the population.
The Pareto principle states that in any population that contributes to a common effect, a relative few of the contributors — the vital few — account for the bulk of the effect
– Juran's Quality Handbook. Using the principle of Pareto probability distribution, Joseph Moses Juran derived the rule to
, by stating: 80% of the defects are originated from 20% of the causes.
The phenomena itself is true, and the mathematics behind is widely used not only in quality management, but also in economics, sales, marketing, and in many other business
In quality management, Pareto analysis is an easy to use, yet transparent and efficient tool to decide what failure causes to concentrate on. The system behind is logical: we
should first focus on 20% of our top failure causes, and by eliminating them we can get rid of 80% of the defects.
The Pareto chart (or also called Pareto diagram) properly visualize out data set, by using bar graph and line graph in one chart (see below). We use the bars to show the
frequency of each defect cause, while the line graph is being used to cumulate the frequency values, reaching a sum of 100%. It can be seen in the example chart that two processes (mounting and screwing) are
causing 78% of the defects, while the rest is only responsible for the remaining 22%.
The Pareto chart (Source: qMindset.com)
Pareto analysis can be linked to other quality tools and methodologies. It can be a major basis of defining
Statistical Process Control
, but it can also give hints where to start your new process improvement program.
Pareto is also used by many organizations for reporting major quality claims (failure statistics) to the management.