Pareto Chart in Excel

Pareto chart in excel is based on 80-20 method, the 80-20 method says that the twenty percent of effort in a process can give eighty percent of the change, this chart is used to show comparison which category has the most impact on a data and has its cumulative frequency, the category with the lowest impact has hundred percent of cumulative frequency.

Excel Pareto Chart (Table of Contents)

• Pareto Chart in Excel
• How to Make Pareto Chart in Excel?
• Advantages
• Disadvantages

Pareto Chart in Excel

Pareto excel chart is a graphical representation of process problems in ranking order from most frequent, down to the least frequent. This model is based on the Pareto analysis excel that helps to identify top-ranked causes of the problem. Once the predominant causes are identified, using Pareto analysis excel the main causes are identified and eliminated.

• The Pareto rule depends on the unequal appropriation of things in the universe.
• The essential basic administer behind the Pareto principle is that in relatively every case, 80% of the aggregate issues brought about are caused by 20% of the issue causes.
• Accordingly, by focusing on the significant issues first, you can dispose of the greater part of your issues. A couple of issues that happen frequently result in the major share of defects.
• Once you fix a few of the huge hitters you likewise dispose of a portion of the little issues in the meantime.

How to Create Pareto Chart in Excel?

We can create a Pareto chart in excel and for that, we have followed some steps listed below:

1. Collect the Raw Data including the Category (cause of a problem) and their Count
2. Calculate the percentage of each category and further compute the cumulative percent
3. Select category, count and cumulative percent range together and Go to Insert tab in Excel and select 2-D column bar graph
4. Select the cumulative percent bars and change the series chart type to Line
5. Now, right click on the cumulative total line and choose format data series and select the secondary axis
6. The percent axis line in the chart may exceed value 100, so we can fix this by clicking on the right- hand axis and select format axis, then under the axis option tab select maximum to set it to be fixed, and set the value to 100

Pareto Chart Example

A quality audit team in a call center audited a certain number of the calls for a process and categorized a list of problems that are hampering the quality delivered over the call and thus impacting the business. We have to make a Pareto chart in excel and find the significant reasons that are impacting the process.

1. Collect the Raw Data including the Category (cause of a problem) and their Count

2. Calculate the percentage of each category and further compute the cumulative percent

Percent will be calculated using the formula =(C3/$C$13) *100, applying throughout the other cells.

Cumulative Percentage

It is the method of calculating the frequency distribution and will be calculated successively by adding the percent with other frequencies. So, the formula will be =D6+C7

After sorting the values from largest to smallest we calculate the cumulative percentage for each of the category.

3. Select category, count and cumulative percent range together

and Go to Insert tab in Excel and select 2-D column bar graph

Now the Pareto chart created is shown below:

4. Select the cumulative percent bars and change the series chart type to Line

The red bars are the cumulative percentage bars, select any one of the bars and change the series, select Line from the change chart type.

Now the Pareto chart will look like shown below:

5. Right click on the cumulative total line and choose format data series and select the secondary axis

• Right click on the cumulative line (in red) and choose format data series

• and select the secondary axis

Select Secondary axis and close the Format Data Series window

Now the Pareto excel chart will look like as shown below

6. Click on the right-hand axis and select format axis,

then under the axis option tab select maximum to set it to be fixed, and set the value to 100

In Axis Option, select the Maximum from Auto to fixed and enter a value 100 manually and close the format axis window

Finally, the Pareto chart in Excel will look like

The Chart above shows that 80% of the effects come from 20% of the causes.

Advantages of Pareto Chart in Excel

• Pareto chart highlights the major cause of the problem that hampers a process
• Pareto chart in excel helps to rectify the major problems and thus increases organizational efficiency. Once the big hitters in a process are discovered using this technique one can move ahead for the resolutions thus increasing the efficiency of the organization
• Pareto chart in excel enhances the problem-solving skills as it enables you to sort out business related issues into strong facts. Once you’ve vividly laid out these facts, you can start the planning important to take care of the issues.
• Pareto chart in excel improves the decision making in a process
• Pareto chart in excel helps the organizational team to focus on the input that will have a greater impact in accordance with the 80/20 rule.

Disadvantages of Pareto Chart in Excel

• The Pareto chart doesn’t provide any insight into the root cause of the problem.
• A single cause or a reason category may further have other factors involved so to find the major impact at each level of the problem we have to create many Pareto charts. So, lower levels of Pareto chart are often required.
• Pareto chart is based on the frequency distribution hence it cannot be used to calculate the mean, standard deviation and other statistical values may often require.
• Pareto chart can’t be utilized to compute how awful the issue is or how far changes would bring a procedure back into specification.

Things to Remember about Pareto Chart in Excel

• Before creating a Pareto chart it is necessary to categorize the issues and it is considered to be a good practice to keep the categories less than 10 in numbers.
• The Pareto excel chart is based on the past data so for continuous improvement of a process, it is necessary to revamp the data on a periodic basis because the Pareto analysis excel is based on the historical data and doesn’t provide the forecast analysis.
• Always create the secondary y-axis with percentage descending in increments from 10 to 100.
• It helps in providing an easier way to make a distinction before and after Pareto analysis excel to verify the process changes had the desired outcome
• We can create multilevel Pareto charts for each issue and can further perform another Pareto analysis excel on the sub level issues and so on.

Pareto Chart in Excel Video

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