Author: Pavel Ryvola | Updated:
What is Pareto Analysis (Pareto Chart) and the 80/20 rule?
A Pareto chart is one of the seven basic tools of quality management. It simplifies decision-making by visually representing the Pareto principle, known as the 80/20 rule. In practice, this principle states that 80 percent of consequences (e.g., nonconformities, scrap, or downtime) stem from just 20 percent of the causes.
When to use a Pareto chart?
- When analyzing claims and creating 8D reports (especially in steps D2 and D4) in the automotive industry.
- When you need to prioritize problems and find out which defect is costing you the most money.
- When implementing corrective actions – you first address the defects that make up the top 80% on the reference curve.
Practical Example: When does Pareto Analysis help?
Imagine you have 1000 defects in a month. You produce plastic parts and track a total of 15 different types of defects. Without deeper analysis, you might start addressing defects at random or based on the most recent one that appeared. However, a Pareto chart will show that "Scratches" account for 450 defects, "Short shots" for 250, and "Cold slugs" for 100. These mere 3 defects (out of 15) account for 80% of your problems. Therefore, it makes no sense to waste energy on the remaining 12 defect types until you resolve these three key issues.
How to create a Pareto chart (calculation)
Instead of the complex dual-axis setup in Excel, our online generator does the heavy lifting for you. For the correct calculation, the input data is first sorted in descending order by frequency. The resulting chart then combines a standard bar chart (decreasing defect counts) and a line chart (a curve showing the cumulative percentage).
The cumulative percentage is calculated as the running total of the percentage shares of individual defects. Once this curve crosses the 80% threshold, you know exactly what you need to focus on.
What's next?
Once you identify the main defect causing 80 % of your issues using Pareto analysis, it is crucial to find its origin. Our online Ishikawa diagram (Fishbone) generator is ideal for this, breaking the problem down into logical 6M categories. To finally solve the problem, use the 5-Why method and frame the entire analysis in an 8D Report.