MSG Team's other articles

11892 What is Six Sigma ? – A Tool to Conquer Variability

Definition of Six Sigma Six Sigma is not a mere methodology or a quality tool. It is a philosophy i.e. a systematic way of thinking to solve quality problems. Six sigma involves use of statistics to convert raw data into facts about how the processes of the organization are being run. The thrust is on […]

10195 Logistics Service Providers keeps Supply Chain Moving

Procurement Logistics, Manufacturing Logistics and Finished Goods Logistics functions are managed by different independent departments in a company. Though the duties of the departments involve common activities like transportation etc., however, the processes and nature of logistics functions are specific to each function besides the requirements and sensitivities of delivery times, schedules, etc. With the […]

11977 Why Growth is Stalling around the World?

Why is Growth Stagnant? We read in the print and online media about why governments worldwide are unable to revive growth especially since the Great Recession of 2008. We also read how policymakers are trying their best to jumpstart growth but are being unable to do so. Moreover, we see stock markets going up while […]

11710 The Ubiquitous Smartphone and how it has Transformed Business and Commerce

How the Ubiquitous Smartphone has Revolutionized B2B and B2C Commerce Who doesn’t own a Smartphone? Right from teenagers to senior citizens and from businesspersons to business leaders, Smartphone ownership is Ubiquitous and all pervasive. Indeed, it is estimated that nearly 80% of the world’s population is now connected to each other through the mobile phones […]

11788 Wage Increases and Tax Cuts

Recently the Dow Jones index faced a drastic fall. This fall was partly because of the fears of inflation that were sparked by increasing employee wages. This is because employee wages have been stagnant in America for close to a decade now. The drastic short-term rise was attributed by many to be the result of […]

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How to Create a Pareto Chart ?

A Pareto chart is one of the 7 basic tools of quality control. It is for this reason that every student of quality management needs to know how to prepare and how to read a quality chart. The procedure for the same has been listed below:

Step 1: Find the Causes

The process starts with finding the underlying causes. The “could be” causes to positive effects like revenues or profits of a company and will therefore need to be maximized. Alternatively these could be the causes of negative effects like losses or defects and will then need to be minimized.

Step 2: Prepare a Frequency Table

Once the underlying causes have been listed down, they need to be checked for their importance. This can be done by running simulations of the process several times and recording the outcomes. A frequency table is one of the best ways to do so. Most managers prefer to have a cumulative frequency column.

Step 3: Convert it into Percentages

Once there is sufficient data to understand the importance of the underlying causes on the process and a frequency table has been created, it’s time to convert the numbers into percentages. This is because percentages are intuitively easier to understand than regular numbers.

Step 4: Arrange in Descending Order

Last but not the least it’s time to arrange the causes. The most important ones must be at the top while the least important ones must be at the bottom of the table. Thus the arrangement must be in descending order. Also once must ensure that the percentages are also cumulatively taken track of. The causes that come before cumulative percentage 80% in reached are usually considered the vital few factors. This arrangement makes it easy for the naked eye to understand the important factors and make necessary changes to achieve desired results.

How to Read a Pareto Chart ?

The above example gives you the results of Pareto Principle in a tabular form. In case you need the same in graphical form, you will need to understand how to create and read a Pareto chart. A Pareto chart may be confusing because it shows both the individual as well as the cumulative data. Here is how to read or prepare a Pareto chart:

Read The Bar Charts For Individual Values

The Bar charts that are connected to the X axis are prepared in descending order. These bars represent the most important factors and gives the user an chance to understand their individual values.

Read The Line For Cumulative Value

The line at the top of the bars shows cumulative values. This gives the user a chance to understand the cumulative values.

Thus the user can simultaneously look at individual values and cumulative values. This helps them easily separate the “vital few” from the “trivial many”.

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