A Pareto chart is a special type of bar chart or graph that lists values in a descending order. More specifically, the most important data starts at the left side of the chart, followed to the right by data of lesser importance. This type of chart is named after Vilfredo Pareto, an Italian sociologist and economist who lived from 1848 to 1923. The point of the Pareto chart is to direct attention to the most significant data that is being analyzed, and is used frequently in quality assurance.
The left, or vertical, axis of a Pareto chart typically represents the frequency of occurrence of that which is being measured. This axis can represent cost or any other important function relative to what is being analyzed. There is also a right vertical axis on the opposite side of the Pareto chart that is used to represent the total cumulative percentage of what is being measured. On the horizontal axis between the two vertical axes, the data that is being analyzed is broken up into groups, segments, bins or categories.
A Pareto chart is mainly used to analyze quality control issues. An example of this might be which kinds of cars are causing the most pollution. On the Pareto chart, the types of vehicles with the worst emissions would start out on the left, and the next worst would be to the right of that one. Types of cars known to be a factor of pollution would continue to be listed from left to right in descending order.
Basically the Pareto chart is attempting to explain that quality problems can usually be attributed to relatively few factors rather than being spread evenly among many. Vilfredo Pareto established a principle called the “80/20 rule” that explains this in more specific terms. According to the 80/20 rule, 80 percent of quality problems can be attributed to 20 percent of the possible causes. In other words, most quality problems in a given situation are caused by a small percentage of factors. In the example of the cars, there would be very few types of cars, such as older model SUVs, that are causing a majority of the pollution. The Pareto chart gives insight as to what can be done to overcome quality assurance issues across a wide variety of situations.