5.6 Basic Lean Tools: Pareto Chart

A Pareto chart is a bar chart of the data from one or more check sheets that builds on the histogram to oversimplify the display.

Imagine our worker has collected weeks of data of various types of errors; his companions on other shifts are doing the same. After a month or two, the check sheets will contain a great deal of data. However, if you’re just looking at sheet after sheet, the data may be a little overwhelming, and you may not be able to easily identify the problem.

A Pareto chart is used to bring structure to the data and visually depict the situation. The graph collects many data points and gives you a simple picture from which to identify the problem. Figure 5.8 presents a typical Pareto chart created in Microsoft Excel using the create chart function.

As you look at the example figure, you see two sets of data displayed. The blue bars are the total number of errors as indicated on the left. There were approximately 575 items with incorrect shrink wrap and approximately 480 pallets with damage. The gold line represents the cumulative percentage of the errors using the scale on the right of the chart. Shrink wrap errors account for about 40% of the total. If you add pallets with damage to shrink wrap errors, it is about 70%. When wrong numbers of cases are added, the total percentage moves up to just above 80% of the total errors.

The Pareto chart does an excellent job of highlighting and prioritizing critical issues or problems. For example, you can see from the example chart your company would likely focus on the shrink wrap machine and process first, with the damage to pallets as a second item.

This feature helps ensure the limited assets in the organization are being used in the most productive way by working on the most significant problems first. That is the ultimate goal of the Pareto chart.