Pareto Analysis

The Pareto diagram oder Pareto principle is based on the assumption that 80% of problems are caused by 20% of potential causes, or that approximately 80% of negative impacts can be eliminated with 20% of the effort. The Pareto principle is used to identify and analyze problems with the goal of recognizing the factors with the greatest impact and developing corrective actions to address them. Data and facts are collected over a specified period, categorized by importance, organized, and then presented in a bar chart, starting with the largest single value. An ABC analysis is then used to establish priorities for further action.