Pareto Chart in Excel

How to Create a Pareto Chart in Excel? (Step by Step)

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

Advantages

• The Pareto chart highlights the major cause of the problem that hampers a process
• It 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
• It also enhances 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.
• It improves decision making in a process.
• It helps the organizational team to focus on the input that will have a greater impact in accordance with the 80/20 rule.

Limitations

• 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 the Pareto chart are often required.
• Pareto chart is based on the frequency distributionFrequency DistributionFrequency distribution refers to the repetitiveness of a variable, i.e., the number of times a variable occurs in a data set. In excel, it is a function to tabulate or graphically represent the recurrence of a particular value in a group or at an interval.read more; 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

• 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.
• It 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 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 analysisPareto AnalysisPareto analysis is a decision making technique based on the 80/20 rule where the company can achieve 80% of the project's benefits by doing the 20% of the work, or the 80% problems of the company are traced to 20 % causes.read more 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 on the sub-level issues and so on.

Pareto Chart in Excel Video

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This has been a guide to Pareto Chart in Excel. Here we discuss its uses and how to make Pareto Chart in Excel along with excel example and downloadable excel templates. You may also look at these useful functions in excel –

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