Hey everyone, welcome to this lecture. What is a Pareto chart? Let's say you are working for an organization that manufactures toy cars. The operations team has gathered data to capture defects during the manufacturing process. The defects data is added to a spreadsheet and uploaded in the resources section of the next lecture. Use a suitable analysis to identify which are the top two to four defect categories that are contributing to almost 80% of the total number of defects.

In this situation, a Pareto analysis or a Pareto chart will come in very handy. A Pareto chart is a type of a bar chart in which the horizontal axis represents categories of interest rather than a continuous scale. The categories are often defects by ordering the bar from largest to smallest, a Pareto chart can help you determine which of the capture defects comprise the vital few and which are the trivial many. A cumulative percentage line helps you judge the added contribution of each category. A Pareto chart can help to focus improvement efforts on areas where the largest gains can be made. In a nutshell, a Pareto chart is based on the 8020 principle.

It says that 80% of the world's wealth is with 20% individuals. Similarly 80% of the problems are due to 20% causes. So if we focus on these 20% causes, you really can focus improvement efforts on areas where the largest gains that is 80% gains can be made. Coming back to the question of identifying the top defect categories that contribute to almost 80% of all the defects. Let's see how do we get this inference by creating a Pareto chart on Minitab