Pareto analysis

Pareto analysis is a decision-making technique based on the Pareto principle (80/20 rule), which states that roughly 80% of effects come from 20% of causes, used to prioritize problems or opportunities by identifying the vital few factors that produce the majority of results (Juran J.M. 1951, p.37)^[1]. The quality team identified 47 different defect types. Overwhelming. But when they graphed defect frequency, a pattern emerged: just 6 defect types accounted for 83% of all problems. Fix those six, and most quality issues disappear. This is Pareto analysis in action—focusing effort where it matters most.

Italian economist Vilfredo Pareto observed in 1896 that 80% of Italy's land was owned by 20% of the population. Joseph Juran, a quality management pioneer, recognized this pattern applied broadly. He called it "the vital few and the trivial many." In 1941, Juran applied the principle to quality control, recognizing that 80% of problems typically stem from 20% of causes. The actual ratio varies—sometimes 70/30, sometimes 90/10—but the core insight holds: a small number of factors usually drives a disproportionate share of outcomes.

Creating a Pareto chart

The visual tool makes analysis concrete:

Data collection

Identify categories. List all potential causes, problems, or factors being analyzed^[2].

Measure impact. Quantify each category's contribution—frequency, cost, time, or other relevant metric.

Chart construction

Rank order. Arrange categories from highest to lowest impact.

Bar chart. Create bars showing each category's contribution, largest to smallest from left to right^[3].

Cumulative line. Add a line showing cumulative percentage, revealing where the vital few threshold falls.

Business applications

The principle applies broadly:

Quality management

Defect prioritization. Identify which defect types cause most problems. Fix the vital few first^[4].

Root cause analysis. Focus investigation on causes producing the most significant effects.

Six Sigma. Pareto charts are standard tools in DMAIC improvement methodology.

Customer analysis

Revenue concentration. Often 20% of customers generate 80% of sales. These merit special attention.

Complaint patterns. 80% of complaints often trace to 20% of recurring issues—solve those first^[5].

Resource allocation

Investment prioritization. Focus resources on the 20% of products, markets, or activities generating 80% of returns.

Inventory management. Apply ABC analysis—20% of items typically represent 80% of inventory value.

Project management

Task prioritization. Focus on the 20% of tasks driving 80% of project results^[6].

Risk management. Address the vital few risks that pose the greatest threats.

Limitations

The technique has boundaries:

Not universal. The 80/20 ratio is a rule of thumb, not a law. Actual distributions vary by situation^[7].

Static snapshot. Analysis captures a point in time; patterns may shift.

Trivial many still matter. The remaining 80% of causes aren't unimportant—they're just lower priority.

Root causes. Pareto analysis identifies what to address but not necessarily why problems occur.

Integration with other tools

Pareto analysis complements related methods:

Cause-and-effect diagrams. Use fishbone diagrams to explore why vital few problems occur.

Control charts. Monitor whether improvements to vital few actually reduce problems^[8].

Process mapping. Understand where in processes vital few problems originate.

Pareto analysis — recommended articles

Quality management — Six Sigma — Root cause analysis — Decision making

References

• Juran J.M. (1951), Quality Control Handbook, McGraw-Hill.
• Montgomery D.C. (2012), Statistical Quality Control, 7th Edition, Wiley.
• Pyzdek T., Keller P. (2013), The Handbook for Quality Management, 2nd Edition, McGraw-Hill.
• ASQ (2024), Pareto Chart and Analysis.

Footnotes

1. ↑ Juran J.M. (1951), Quality Control Handbook, p.37
2. ↑ Montgomery D.C. (2012), Statistical Quality Control, pp.45-62
3. ↑ Pyzdek T., Keller P. (2013), Handbook for Quality Management, pp.89-104
4. ↑ ASQ (2024), Pareto Chart and Analysis
5. ↑ Juran J.M. (1951), Quality Control Handbook, pp.156-172
6. ↑ Montgomery D.C. (2012), Statistical Quality Control, pp.234-248
7. ↑ Pyzdek T., Keller P. (2013), Handbook for Quality Management, pp.312-328
8. ↑ ASQ (2024), Pareto Chart and Analysis

Author: Sławomir Wawak