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Pareto Charts Video

  • This presentation is an introduction to Pareto Charts, the Pareto Principal, the 80-20 rule, and how Pareto charts can save you time and make your life easier.
  • When you encounter problems with your car, you need to know what tools are needed to fix the problem, and how and when to use each tool.
  • The same is true when you want to fix problems within your company. There are seven basic tools that are used in quality, and they are:
    A: Flowcharts
    B: Scatter diagrams
    C: Control charts
    D: Histograms
    E: Cause and effect diagrams
    F: Check sheets
    G: And of course the Pareto diagram which is our topic of discussion today...
  • These tools can seem pretty complex at first, but don't worry, when they are properly explained, they are actually pretty simple tools.
  • Everyone has problems at work, so let's see how Pareto charts as one of the seven basic quality tools can make our lives easier.
  • Let's pretend that each different color candy is a different problem that we face in our job, and these represent one week's worth of problems.
  • Our days are so rushed that it can be quite confusing to make any sense out of our problems. Sometimes it's hard to know where to start.
  • To take advantage of the power of the Pareto Principle, you need to take a few moments out of your busy day to take a snapshot of the problems you are having. Then you can start to gather information and analyze each problem.
  • Next you need to identify and categorize the problems you are having and establish how many times each problem occurs over a given period of time. There, that looks better already doesn't it?
  • Then using your count of each group, you can get an idea of how each problem stacks up against each other. Then put the largest groups to the left descending to the right. You now have a basic Pareto chart.
  • One of the purposes of Pareto charts is to identify the most significant items which will show you where to focus your efforts.
  • Before we continue, let's talk about the Pareto Principle. Vilfredo Pareto was an Italian economist that observed the unequal distribution of wealth in his country.
  • Vilfredo Pareto observed that:
    A: Not everyone in his country shared the same amount of wealth
    B: Therewere far more poor people than rich
    C: He actually created a mathematical formula that said 20% of the people owned 80% of the wealth
    D: And 80% of the people owned 20% of the wealth
  • Dr. Joseph Juran applied Pareto's observations about economics to the world of Quality and established a principle he named the "vital few and trivial many".
  • Let"s apply this new concept of the vital few and trivial many. This principle means that 80% of the problems you face come from 20% of the causes. For instance, if you discover there are 10 reasons or causes for the problems you are having, two of those causes are responsible for 80% of your problems.
  • If you focus your efforts on eliminating those two causes or, the vital few, 80% of your problems go away. Let"s look at a very visual example of eliminating 80% of our problems that plague us daily. That is the power and beauty of applying the Pareto principle.
  • That means that 80% of the causes of your problems are trivial and will not yield the same benefits as eliminating the vital few. In this example, we could spend a lot of time eliminating 8 of the 10 causes and only eliminate 20% of our problems as shown. That is a lot of work for such a minor improvement.
  • Check sheets are a great tool to help you gather the basic information about the problems you face on a daily basis. You can list the types of problems you are having and how often they occurred each day. From this information you can create a Pareto chart which will help steer you in the right direction.
  • This Pareto chart shows the data from the check sheet you just saw. It graphically displays the information so it is easy to read and interpret by anyone.
  • It really doesn't take a genius to see the benefits of using the Pareto principle and Pareto charts. Be smart and spend less of your valuable time eliminating the majority of your problems.

We hope you enjoyed this presentation. We have many years experience solving problems in the workplace using Lean and Six Sigma tools and methodologies. We are here to help your company tackle their biggest problems. Call us today!


About the author:

Jeff Hofstetter

Jeff Hofstetter Jeff is the President of Xtreme Lean Consulting with over 24 years of experience in Lean and Six Sigma Consulting. Jeff is a results-driven, decisive leader with a proven track record of initiating time and cost-saving operational improvements while leading diverse teams to strong, sustainable performance gains. Skilled mentor and coach with a hands-on, positive approach to resource management, leadership development, and training.

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