Using Pareto Analysis to Support Repetitive Defect Management

Sofema Online (SOL) www.sofemaonline.com looks at a technique for data analysis

Analytical Techniques to Support MCC Recurrent Defect Analysis - Introduction

>> Pareto analysis is premised on the idea that 80% of a project's benefit can be achieved by doing 20% of the work- or, conversely, 80% of problems can be traced to 20% of the causes.
>> Pareto analysis is a powerful quality and decision-making tool. In the most general sense, it is a technique for getting the necessary facts needed for setting priorities.

Steps of Pareto Analysis

>> By applying the 80-20 rule, problems can be sorted based on whether they affect profits, customer complaints, technical issues, product defects, or delays and backlogs from missed deadlines.
>> Each of these issues is given a rating based on the amount of revenue or sales, time lost, or the number of complaints received. Here is a basic breakdown of the steps of Pareto analysis:

o Identify the problem or problems
o List or identify the cause of the issues or problems, noting that there could be multiple causes
o Score the problems by assigning a number to each one that prioritizes the problem based on the level of negative impact on the company
o Organize the problems into groups, such as customer service or system issues
o Develop and implement an action plan, focusing on the higher-scored problems first, in order to solve the problems

Important Note: Not all problems will have a high score, and some smaller problems may not be worth pursuing initially. By allocating resources to high-impact issues or higher scores, companies can solve problems more efficiently by targeting the issues that have a major impact on profits, sales, or customers.

Pareto analysis shows that a disproportionate improvement can be achieved by ranking various causes of a problem and concentrating on the solutions with the largest impact.

How to Create a Pareto Chart

>> A common part of Pareto analysis is to graphically depict the occurrence of each variable being tracked.
>> This depiction is called a Pareto chart, and it organizes and displays information to show the relative importance of various problems or causes of problems. It is similar to a vertical bar graph in that it puts items in order (from the highest to the lowest) relative to some measurable effect of interest: frequency, cost, or time.

Here is the process of making a Pareto chart.

>> Develop a list of problems to be compared.
>> Develop a standard measure for comparing the items. For example, how often it occurs: frequency (e.g., utilization, complications, errors); how long it takes (time); and how many resources it uses (cost).
>> Choose a timeframe for collecting the data.
>> For each item, tally how often it occurred (or cost or total time). Then, add these amounts to determine the grand total for all items.
>> Find the percent of each item in the grand total by taking the sum of the item, dividing it by the grand total, and multiplying by 100.
>> List the items being compared in decreasing order of the measure of comparison: e.g., the most frequent to the least frequent. The cumulative percent for an item is the sum of that item’s percent of the total and that of all the other items that come before it in the ordering by rank.
>> List the items on the horizontal axis of a graph from highest to lowest. Label the left vertical axis with the numbers (frequency, time, or cost).
>> Label the right vertical axis with the cumulative percentages (the cumulative total should equal 100%).
>> Draw in the bars for each item.
>> Draw a line graph of the cumulative percentages. The first point on the line graph should line up with the top of the first bar.

The final step is analysis. You can now analyze a Pareto chart by identifying those items that appear to account for most of the difficulty.

Advantages and Disadvantages of Pareto Analysis

In the most general sense, the advantage of Pareto analysis is that it helps to identify and determine the root causes of defects or problems. Because of this, businesses are able to eliminate or resolve defects or errors with the highest priority first.

Pareto analysis does not provide solutions to issues - It is only helpful for determining or identifying the root causes of a problem(s). In addition, Pareto analysis only focuses on past data.

While information about past errors or problems is useful, it's not a guarantee that it will be relevant in future scenarios.

A final disadvantage of Pareto charts is that they can only show qualitative data that can be observed; they cannot be used to represent quantitative data.

Next Steps

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