“Pareto” Misuse

Many people have built the Bar Chart in figure 1 below and called it a Pareto Chart. Even I in my early years a Quality Engineer created this chart as a “Pareto chart”. But this is NOT a Pareto Chart. It is only a Bar Chart.

 

 

Figure 1: Bar Chart of Sales Returns

 

 Why? This is because this bar chart does not show us, without some mental work, the Pareto Principle that it is named after. Is it improper to use this Bar Chart? No the Bar Chart is perfectly fine if it shows what you wanted. But to call it a Pareto is improper.

 

The Pareto Principle:

The Pareto principle states that 80% of the impact of the problem will show up in 20% of the causes. Or as Vilfredo Pareto, the Italian economist had stated it; “80% of the wealth is owned by 20% of the people.” It was Joseph M. Juran, a Quality Guru, which named the principle after Vilfredo Pareto. It has also been called the 80-20 rule.

 

The Chart:

The Pareto Chart, see figure 2 below, is a bar chart that displays by frequency, in descending order, the most important defects and also has the cumulative percentage on a second y-axis (to the right of the chart). The Bars gives us the biggest hitter on the left, but the cumulative percentage line lets us display the Pareto Principle. If the Pareto principle is evident, about 20% of the categories on bottom of the chart will have about 80% of the impact on the problem.

 

Figure 2: Pareto Chart of Sales Returns

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Author: Peter L. Bersbach

Master Black Belt ASQ CQE#09510 CQMgr#02478 (520) 721-2077 peter@bersbach.com Peter is a results oriented Master Black Belt with significant (over 30 years) "Drop in" experience in managing and execution of Six Sigma projects. Major strengths in: Statistical Techniques, Lean Application, Critical Chain Project, Teaching & Facilitation Skills, Listening, and Working with diverse teams. Career Highlights: Saved a "Bleeding"; Division as a Key member of the Raytheon Six Sigma team responsible for analyzing the business and developing an effective improvement plan fast. He lead the team in their worst area, composites, where we reduced the defective rate from 100% to 25% stop the divisions bleeding. Created step function solutions to customer needs - Developed and facilitated a process around design for Six Sigma that immersed design teams into an environment to achieve novel, non linear, and relevant solutions to war fighter needs that lead to a 95% success rate on these designs. Each contract was worth several million dollars. Saving of a sole source supplier of the Defense Industry from bankruptcy - Lead a Six Sigma team responsible for analyzing the business and developed an effective improvement plan at a key defense industry. Where we reduced the press setup time through process characterization, by 99% (from 12 hours to 15mins). This started a series of successes that now has the company turning profits. Improved a Green Belt Program to achieve significantly better results - Responsible for designing and implementing a results based Green Belt program that was having a certification rate of less than 50% to one of 75% (3000 Cert. Green Belts) returning to the company with results of over $20M annually. Blending High Tech with High Rate - Developed an highly effective minimal inspection Quality System for a startup subsidiary that was combining High tech products on high rate manufacturing lines. Results:97% suppliers shipping Dock to StockFix Cost Pricing for our CustomersQuality issues less than 2% with a response and correction within 24hrs.