Pareto Analysis is a decision-making technique used to identify the most significant factors in a problem by applying the 80/20 rule. It helps businesses focus on the 20% of causes that generate 80% of the problems, enabling efficient resource allocation and maximum impact.
Scenario: A manufacturing plant wants to reduce production defects.
| Defect Type | Occurrences | % of Total | Cumulative % |
|---|---|---|---|
| Scratches | 50 | 35% | 35% |
| Misalignment | 30 | 21% | 56% |
| Cracks | 20 | 14% | 70% |
| Color Variation | 15 | 11% | 81% |
| Surface Bubbles | 10 | 7% | 88% |
| Others | 15 | 12% | 100% |
Finding: Scratches & misalignment contribute to 56% of defects, making them the top priority for improvement.