You don’t have to be a math wiz to understand what a Pareto Chart is.

What is a Pareto Chart?

A Pareto Chart is a graph that indicates the frequency of defects, as well as their cumulative impact. Pareto Charts are useful to find the defects to prioritize in order to observe the greatest overall improvement.

In order to expand on this definition, let’s break a Pareto Chart into its components.

1) A Pareto Chart is a combination of a bar graph and a line graph. Notice the presence of both bars and a line on the Pareto Chart below.

A Pareto Chart for the defects in shirts.

A Pareto Chart for the defects in shirts.

2) Each bar usually represents a type of defect or problem. The height of the bar represents any important unit of measure — often the frequency of occurrence or cost.

3) The bars are presented in descending order (from tallest to shortest). Therefore, you can see which defects are more frequent at a glance. 

4) The line represents the cumulative percentage of defects.

Let’s look at the table of data for the Pareto Chart above to understand what cumulative percentage is.

Type of Defect Frequency of Defect % of Total Cumulative %
Button Defect 23 39.0 39.0
Pocket Defect 16 27.1 66.1
Collar Defect 10 16.9 83.1
Cuff Defect 7 11.9 11.9
Sleeve Defect 3 5.1 16.9
Total 59

For Collar Defects, the % of Total is simply (10/59)*100. 

The Cumulative % corresponds to the sum of all percentages previous to and including Collar Defects. In this case, this would be the sum of the percentages of Button Defects, Pocket Defects and Collar Defects (39% + 27.1% + 16.9%). 

The last cumulative percentage will always be 100%. 

Cumulative percentages indicate what percentage of all defects can be removed if the most important types of defects are solved.

In the example above, solving just the two most important types of defects — Button Defects and Pocket Defects – will remove 66% of all defects.

In any Pareto Chart, for as long as the cumulative percentage line is steep, the types of defects have a significant cumulative effect. Therefore, it is worth finding the cause of these types of defects, and solving them. When the cumulative percentage line starts to flatten, the types of defects do not deserve as much attention, since solving them will not influence the outcome as much.

5) A Pareto Chart is a quality tool: it helps analyze and prioritize issue resolution.

The idea behind a Pareto Chart is that the few most significant defects make up most of the overall problem. We have already covered two ways in which Pareto Charts help find the defects that have the most cumulative effect. 

One, the first bars are always the tallest, and they indicate the most common sources of defects. Two, the cumulative percentage line indicates which defects to prioritize to get the most overall improvement. 

6) Pareto Charts can be analyzed with the Pareto Principle, also known as the 80/20 rule. 

What is the Pareto Principle?

The Pareto Principle states that 80% of the results are determined by 20% of the causes.

Therefore, you should try to find the 20% of defect types that are causing 80% of all defects. 

While the 80/20 rule does not apply perfectly to the example above, focusing on just 2 types of defects (Button and Pocket) has the potential to remove the majority of all defects (66%).

Applying the Pareto Principle to Quality in Manufacturing 

When comes the time to build Pareto Charts to analyze defects in your production lines, you should not have to open Excel. With the right manufacturing software, your Pareto Charts will be created automatically.

Tulip Analytics integrates all your operations’ data in one place. All your reports and graphs — including Pareto Charts — will be displayed on dashboards in real-time. That way, you will be able to conduct root cause analysis for the defects that have the most influence on your output. Request a demo to see Tulip in action!

Multiple analytics reports on a Tulip Dashboard, including a Pareto Chart (bottom left corner).

Multiple analytics reports on a Tulip Dashboard, including a Pareto Chart (bottom left corner).