Pareto Charts, Principle, and Practical Applications

Subject: Case Studies
Pages: 2
Words: 347
Reading time:
2 min

Nowadays, there are a large number of tools that can be used to analyze and present information in business and economics. When speaking about such tools, it is necessary to discuss a Pareto chart, a tool that depicts the information on the frequency of events and, therefore, can be used to sort out priorities when solving various problems related to production, distribution, and quality. Discussing this tool and the prerequisites to its creation in their book, Goetsch and Davis state that the tool is extremely useful when it is necessary to “separate the important from the trivial.” Pareto charts include line charts and bars that are used to indicate the frequency of certain events in order to make conclusions on the most and the least important causes of defects and other problems in business.

In reference to the use of this tool, its key task is related to sorting out priorities during the analysis of practical problems and their possible causes. A Pareto chart presents a useful tool because, as it follows from its practical applications, it allows analyzing the potential causes of quality problems in order to define the individual importance of each cause and create a problem-solving strategy based on this information. Given that the resources that companies or individuals possess are always limited, specialists in different fields use the tool to minimize misallocation waste and eliminate the key causes of problems. In particular, the tool can be used to analyze quality, costs, delivery due dates, or concerns related to occupational safety.

Pareto charts are related to the Pareto principle that states that just a few actions or causes can be enough to produce overwhelming results. As is clear from the mentioned principle, the majority of problems occur due to the impact of a small number of factors. Therefore, people are required to start working on problems by defining their potential causes and analyzing the individual impact of each cause. Pareto charts utilize this principle, helping to define the minimum required actions to solve problems.