To increase and maintain quality in companies is a complex task and requires a strategic approach. The Pareto analysis facilitates the prioritization of errors and weaknesses in the company.
The Pareto analysis is used to identify problem areas in organizations and is based on the Pareto principle. This means that 80% of the error costs are based on only 20% of the error types/categories or error causes.
How do I create a Pareto analysis or a Pareto chart?
In the following, we give you an example of how a Pareto analysis is carried out and the corresponding Pareto diagram is created. For illustration purposes, we use examples of errors from the area of painting and packaging. The example can, of course, be applied to all other types of defects.
1. Definition of the scope of consideration
First, the problem should be determined. For example, it must be decided whether errors are to be analyzed company-wide, or only for individual departments, products or product groups.
2. Definition of error types/categories and key figures
In the next step, you must define the defect types/categories and determine which variables you want to include in the evaluation. It is usual to evaluate based on defect frequency or defect costs. The latter usually proves to be more useful, since the monetary effects on the company should ultimately be the deciding factor.
3. Documentation of the errors
Based on these preliminary considerations, a list of all errors (error collection list) should be created. Ideally, this data should be collected continuously during operation and promptly after occurrence.
4. Creating the Pareto chart
In the next step, you sort the defect types/categories in descending order according to the frequency of occurrence or the defect costs incurred. The result should be presented in the form of a bar chart, to simplify the analysis. To apply the Pareto principle, it is necessary to find out which 20% of the error types/categories are responsible for 80% of the error costs or errors that occurred. To do this, you add the cumulative defect costs or frequencies in the form of a line chart. The result is the so-called Pareto chart.
5. Derive potential for improvement
The generated Pareto diagram, allows you to derive statements about the quantitative effects of individual defect types/categories. A very steep curve of the cumulative frequency/cost of defects indicates that a few defect types/categories cause a large number of defects or very high defect costs. This can be a good sign since a large number of defects can be eliminated by reducing several defect causes. In this way, it may be possible to significantly increase quality and reduce error costs with comparatively little effort. It should be noted that the evaluation of error costs, is usually preferable to the evaluation of the pure error frequency. If you want to further subdivide the defect types/categories, you can use an ABC-Analysis.
Below you see the Pareto diagrams belonging to the Pareto analysis in our example:
Download qmBase Pareto analysis template
To make the introduction to the Pareto analysis as easy as possible for you, we provide our Pareto chart template for Excel for download. In this template, you can document your defects and create an automatic Pareto analysis from them.
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