Pareto Charts created by QI Macros for Excel

Pareto Charts use the 80/20 rule, based on the work of Vilfredo Pareto the Italian mathematician, who suggested that 20 percent of the people would accumulate 80% of the wealth. In America, 4% of the people have over 50% of the wealth--the Pareto principle squared.

In Six Sigma, Pareto charts show where effort can be focused for maximum benefit. It may take two or more Pareto charts to focus the problem to a level that can be successfully analyzed.

How is a Pareto Chart Created?

The Pareto chart combines a bar graph with a cumulative line graph. The bars are placed from left to right in descending order. The cumulative line graph shows the percent contribution of all preceding bars.

Here is a sample Pareto chart created using the QI Macros for Excel SPC software

The Pareto chart macro and Pareto Chart Template are just one of the tools included in the QI Macros for Excel SPC Software for Excel.

QI Macros Excel SPC Software for Histograms and Control Charts $139 Plus S&H

Common Pareto Chart Errors

1. Stopping Your Pareto Chart Analysis Too Soon

A common error is to stop at too high a level. Double the power of Pareto's 80-20 rule by applying the 4-50 rule. Look at the 20% within the 20% (4%) that represents over half of the problem. You can do this by drawing another Pareto chart using just the data representing your big bar. In the example below the blue bar represents the 4% of the business that is causing over 50% of the problem.

2. Settling for a Perflato chart instead of a Pareto Chart

If the left bar or two left bars on your Pareto chart are not significantly bigger than the other bars on the chart then you have a "perflato" chart. Try organizing your data by another attribute (e.g subtotal by geography or time of day instead of by error type) and see if you can get a Pareto chart that helps you better focus your efforts.

For example, one client created a Pareto chart of insurance claim errors by error code and found no one code that accounted for a significant amount of errors. They then created a Pareto chart of errors by insurance company and found that one company was the source of most of the errors. Once they approached the company with compelling data it was easy to convince them their process needed fixing.

The Pareto chart macro and Pareto Chart Template are just one of the tools included in the QI Macros for Excel SPC Software for Excel.

Download the FREE 30-day Evaluation copy of the QI Macros Excel SPC Software for Six Sigma

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QI Macros Excel SPC Software for Histograms and Control Charts $139 Plus S&H

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