What are Pareto charts?
A Pareto Chart is a bit like a bar chart, in that it presents the frequency of results of different categories of data. The key difference however, is that a Pareto Chart orders the results starting with the most frequent category on the left. In addition, a Pareto Chart also includes a Cumulative Frequency line, which highlights the total frequency of all the categories, again starting on the left.
An example: A typical Pareto Chart is shown below. In this example (taken from Edition 4 of the Lean Six Sigma and Minitab book), a project team are looking at reasons for postage delays. They have sampled 240 delayed items and identified the reason for the delay in each case. The Reason for delay is categorical data and therefore a Pareto Chart can be used to help identify the most common reasons for postage delay.
Figure 1: A Pareto Chart of reasons for delayed postage items (taken from the example on page 134 of the Lean Six Sigma and Minitab book).
So, in the example above, it can be seen that:
- No Postcode is the most frequent result, with 98 items (out of the 240 sampled) being delayed for this reason. As the table on the Pareto Chart indicates, this is equivalent to 40.8%.
- The second most frequent reason for delay is No Stamp, which represented 31.7% (76 out of the 240 sampled).
- The Cumulative Frequency line (shown in blue) demonstrates that the first two categories account for 72.5% of the delayed post items. If the Not Franked category is also considered, then the first three categories account for 90% of all delayed items!
Why are Pareto Chart so useful?
- Pareto Charts are a great way for analysing categorical data (which can often be text).
- They help to rapidly identify the most common categories within a sample of data.
- They’re easy to create and interpret.
The Pareto Principle (also know as the 80/20 Rule): You may well have heard of the 80/20 Rule, which states that 20% of the reasons for failure create 80% of the actual failures. So, the idea is that in most improvement projects, if you can identify and control the key 20% of reasons for things going wrong, then you will be able to eliminate the vast majority (80%) of actual failures in your process or product.
More information on Pareto Charts can be found on pages 132-135 of the Fourth Edition of the Lean Six Sigma and Minitab book.