The Pareto chart allows you to determine an organization’s irregularities, identify its points of
improvement and define which action plan is essential to attack its losses.
Do you want to know more about the Pareto chart, the advantages of applying it and how to make
one? Keep reading!
What is Pareto chart?
The Pareto chart is a graph that organizes sweden telegram data values, which are separated by bars
and organized from largest to smallest, from left to right respectively.
This chart allows you to assign an order of priorities for an organization’s decision-
making and determine which are the most serious problems that must be resolved first.
Its purpose is to make visible the real problems that are affecting the achievement of the company’s
objectives and to reduce its losses.
In addition, it allows us to previously evaluate what the needs of the target audience are and how to
satisfy them with our product or service, also achieving the marketing objective .
How did the Pareto chart come about?
It was first stated by the Italian engineer, social media content with strikingly sociologist, economist
and philosopher Vilfredo Pareto (1848-1923).
Through his study of the division of wealth in Italy at that time, he concluded that 80% of the wealth
was in the hands of 20% of the population and the other 20% of the wealth was in the hands of the
remaining 80%.
Having determined this, he published it for the first time in 1896 in his “Cours d’économie politique”.
How does the Pareto principle work?
It represents the 80/20 rule , that is, in most situations, 80% of the consequences are due to 20%
of the actions or 80% of the defects in a product are due to 20% of the causes.
In other words, we can say that although many factors contribute to a cause, few are
responsible for that result .
Although the relationship is not always exact, the Pareto principle is usually fulfilled and is the basis
of this diagram.
What are the elements of the Pareto chart?
The Pareto chart is made up of a structure mobile list divided into three parts:
- The left “Y” axis is the frequency of occurrence of the problem.
- The “Y” axis on the right side is the cumulative percentage of the total number of occurrences.
- The bottom of the “X” axis shows any problems, complaints, defects, or waste that occurred.
What are the advantages of using the Pareto chart?
By allowing us to focus on what really affects the company, the Pareto chart achieves:
- that the company continuously improves;
- the analysis and prioritization of problems;
- optimize effort and time by focusing on aspects whose improvement will have a direct impact;
- provide a simple and comprehensive view of the problems;
- make the graph easy to understand;
- stimulate the work team in the search for continuous improvement;
- in advance, check which is the best automation tool that can be used or purchased for our marketing strategy .
In addition, the Pareto chart allows you to compare diagrams of the same problem at different times,
thus determining whether there were improvements, changes and positive effects on said problems.
In what areas is it possible to apply it in a company?
The Pareto chart can be applied in all areas of the company in a similar way. Below, we will show you
some of them:
Production area
20% of a company’s processes generate 80% of its products or services.
Sales area
80% of the deals closed by the sales force are generated by 20% of the products and 20% of the
customers generate 80% of the income.
Management area
80% of a company’s success comes from 20% of its employees.
Complaints and suggestions area
20% of product rejections account for 80% of customer complaints .
Warehouse management
80% of the inventory cost represents 20% of the products.
Quality control
20% of defects affect 80% of processes.
How to make a Pareto chart in an organization?
Below, we will tell you the steps and an example so that you can properly create a Pareto chart. Continue reading!
1. Select which aspect you are going to analyze
It is essential that you determine what problem is causing you losses, whether it is time, sales, personnel, among others.
2. Group the data
You must divide by cells according to the category and the number of frequency (or occurrence).
The category (or issues) are the most common ones you see on your website.
Frequency is, out of a given number of customers, which ones complained about which problem.
3. Sort the data
Organize your table according to the decreasing order of frequency and add the cumulative frequency of the cases by adding the previous frequency to the next one .
4. Add percentage values
Add another column to add the unit percentage values.