The Quality Toolbox: The Vital Few & Trivial Many

Pareto Analysis: Around the turn of the 20th century, Italian economist Vilfredo Pareto made a couple of observations that led him to develop a principle that continues to be a powerful problem-solving tool today. He observed that around 20% of the Italian population owned approximately 80% of Italy’s wealth. He later observed that about 20% of the pea pods in his garden produced roughly 80% of his pea crop each year. This correlation led Pareto to postulate that, in most things, a small number of causes are responsible for a large percentage of the effect. In the late 1930’s, quality guru Dr. Joseph M. Juran recognized this principle as the Vital Few and Trivial Many Rule, which was later generalized into Pareto’s Principle or the 80/20 Rule.

Pareto analysis allows management by data instead of emotion; and as with most things, data-based decision-making will yield the highest return on investment. The first step is to categorize the problems by type or defect code. Next, generate a simple histogram, which ranks the defects in descending order of magnitude. Then, using the data set in the histogram, graphically portray the data set in a simple bar chart format. Finally, add a trend line showing the accumulated relationship of the defects to the whole, to visually identify what defects make up roughly 80% of the total dollars. The attached Figure illustrates what a Pareto Diagram might look like in a typical metal fabrication process. The strategy behind Pareto Analysis is to identify the areas with the highest improvement potential while minimizing the number of improvement initiatives. What this means in simple terms is getting the biggest bang (improvement) for the buck (effort).

Referring again to the Figure, the improvement team would easily determine that their efforts should be focused on eliminating the two defects labeled “Scratches” & “Paint”. Once improvement has been attained on these “80/20” areas, the reporting cycle is run again. The “new 80/20” problem areas are identified, and the team now focuses on eliminating these. The beauty of this system is that, with each iteration, the order of magnitude continuously declines so that the next 80% of the dollars represent a much lower amount of waste dollars, which is the essence of continuous improvement.