Purpose
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. 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 use clearly the choices that should be made, they can be used to set priorities for many practical applications in your command.
Examples:
To construct a Pareto Chart, you need to start with meaningful data which you have collected and categorized. You may want to turn to the Data Collection module at this point to review the process of collecting and categorizing data that you can chart.
The steps are as follows:
Step 1: Record the Raw Data
List each category and its associated data count.
Step 2: Order the Data
Prepare an analysis sheet, putting the categories in order and placing the one with the largest count first.
Step 3: Label the Left-hand Vertical Axis
Make sure the labels are spaced in equal intervals from 0 to a round number equal to or just larger than the total of all counts. Provide a caption to describe the unit of measurement being used.
Step 4: Label the Horizontal Axis
Make the widths of all of the bars the same and label the categories from largest to smallest. An "other" category can be used last to capture several smaller sets of data. Provide a caption to describe them. If the contributor names are long, label the axis A, B, C, etc. and provide a key.
Step 5: Plot a Bar for each Category
The height of each bar shou8ld equal the count for that category. The widths of the bars should be identical.
Step 6: Find the Cumulative Counts
Each category's cumulative count is the count for the category added to the counts for all larger categories.
Step 7: Add a Cumulative Line
This is optional. Label the right axis from 0 to 100%, and line up the 100% with the grand total on the left axis. For each category, put a dot as high as the cumulative total and in line with the right edge of the category's bar. Connect all the dots with straight lines.
Step 8: Add Title, Legend, and Date
Step 9: Analyze the Diagram
Look for the break point on the cumulative percent graph. It can be identified by a marked change in the slope of the graph. This separates the significant few from the trivial many.
NOTE: The significant few-trivial many principle does not always hold. No matter how many data are categorized, they can be ranked and made into a Pareto diagram. But sometimes no single bar is dramatically different from the others, and the Pareto Chart looks or gently sloping. To attack the tall bar in that situation is no help. You need to look for another way to categorize the data.
When you look at a Pareto Chart, you can see break points in the heights of the bars which indicate he most important categories. This information is useful when you are establishing priorities.
Step 1: Gathering Data
The following table represents 1992 revenue for Paramount Publishing based upon different publishing areas:
Area Revenues ($ millions)
Business and Professional 280.4
Consumer 387.2
Educational Technology 61.1
Higher Education 298.8
International 154.9
School 315.9
Supplementary Education 84.8
Step 2: Gathering Data
Step
3: Interpreting Data