What is it: Pareto Charts (Also known as a Pareto Diagram or Pareto Analysis) is a bar chart, and is typically used to prioritize competing or conflicting "problems," so that resources are allocated to the most significant areas with the highest count (occurrences). The lengths of the bars represent frequency or cost (time or money), and are arranged with the longest bars on the left and decending to the shortest bar to the right. In this way the chart visually depicts which situations are more significant.

The Pareto principle states that 80% of the effects of the problem will show up in 20% of the causes. Proper use of Pareto Chart will also have the cumulative percentage on a second y-axis (to the right of the chart) the second axis is used to identify if the Pareto principle is evident in the data. If the Pareto principle is evident, then about 20% of the categories on the far left will have about 80% of the impact on the problem.

What is it used for: To organize and prioritize data from highest to lowest.

Why use it: Pareto Charts provide a tool for visualising the Pareto principle, which states that a small set of problems (the "vital few") affecting a common outcome tend to occur much more frequently than the remainder (the "useful many"). A Pareto Chart can be used to decide which subset of problems should be solved first, or which problems deserve the most attention. Pareto Charts are often constructed to provide a before-and-after comparison of the effect of control or quality improvement measures.

Where to use it: The Pareto Chart is used where you need to identify and prioritize problems to be solved. Pareto Diagram - Focuses on efforts or the problems that have the greatest potential for improvement by showing relative frequency and/or size in a descending bar graph, based on the proven Pareto principle: 20% of the sources cause 80% of any problems.

When to use it:

• When trying to prioritize activities or focus for a team or for an organization.
• When analyzing data about the frequency of problems or causes in a process.
• When there are many problems or causes and you want to focus on the most significant.
• When analyzing broad causes by looking at their specific components.

How to use it:

Pareto Chart Procedure

1. List all elements of interest
2. Measure the elements, using same unit of measurement for each element
3. Order the elements according to their measure
4. Calculate the percentage for each element out of the total measurement
5. Accumulate the percentage from top to bottom to equal 100 %
6. Create a bar and line graph, line representing cumulative percentage
7. Work on the most important element first

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