• 80% of the wealth in Italy was held by 20% of the population;
• 20% of customers accounted for 80% of sales;
• 20% of parts accounted for 80% of cost, etc.

These observations were confirmed by Juran (1960) and resulted in what is known as the Pareto Principle.

"Not all of the causes of a particular phenomenon occur with the same frequency or with the same impact"

Such characteristics can be highlighted using Pareto Charts

• Pareto charts show the most frequently occurring factors
• Analysis of Pareto charts help to make best use of limited resources by targeting the most important problems to tackle

For example,

• Products may suffer from different defects, but
  • the defects occur at different frequency
  • only a few account for most of the defects present
  • different defects incur different costs

So a product line may experience a range of defects (A, B, C ... J). Plotting the percentage contribution of each type to total number of faults, gives the bar-plots in the following diagram. Next if, each of these contributions are sequentially summed, a cummulative line plot is obtained. These two plots together make up the Pareto Chart.

Example of Pareto Chart

From the information on the chart, the manufacturer could for example,

• concentrate on reducing defects A, B and C since they make up 75% of all defects
• focus on eliminating defect E, if defect E causes 40% of monetary loss