PARETO CHART IN SIX SIGMA - EXPLAINED

What is a Pareto Chart in Six Sigma? 

 

Six Sigma is an array of tools and approaches to process management. With businesses around the world, Six Sigma has become a global trend.

Companies and individuals use six sigma methodologies to boost the overall operating efficiencies. It helps restore business processes and emphasizes full productivity in all service characteristics, and focuses more on reducing process errors.

The Six Sigma methodology involves the usage of a Pareto Chart to find out the solutions to errors and also effectively reduce them. 

Pareto chart is a way of finding out the most common factors that lead to an error situation. To conduct a graphical analysis of the data, the Pareto Chart can help to define the significant drivers for the method being employed and thus prioritize the behavior in line with it.

Pareto charts are used as a valuable tool in project management, notably in Six Sigma.

 

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Pareto Chart Explained in Detail

 

Pareto charts are used to show the frequency the phenomena occur at. It is a bar graph where each frequency or frequency range is displayed on the basis of the Pareto Principle, also referred to as the 80-20 rule or the vital few rule, in descending order of data importance from left to right. The Pareto graph shows vertical bars in a downward order, and a line graph showing cumulative total categories. In Microsoft Excel, these charts can be easily created.

Many of the process defects follow a certain pattern, with relatively few problems causing the bulk of defects. In order of faults, the Pareto Analysis offers the relative frequency of problems, thus providing a list of absolute priority problems. The most outstanding results can be achieved by tackling and improving problems based on those priorities. In most of the cases, Pareto charts are an indispensable tool used in total quality management, but the question arises as to when are we supposed to utilize them.

It is advisable to create a Pareto chart in the following instances:

 

• Analyzing the defect frequency in a process
• Determination of the process causes
• Figuring out the most significant problems of a process 
• Communication of data with others effectively.

 

Pareto Analysis Principle With Example

 

Profits – By using Pareto chart histogram, many leading companies found that 20% of their products drive around 80% of their profits. Therefore it is advisable that the company must focus on 20% of the remaining customers as It will provide them the most fantastic opportunity to drive profits.

Errors – It is frequently observed in a company that one part of their method is responsible for 80% of its errors. Hence, the company can typically produce outsized results when fixing one operation.

Six Sigma project teams adopting the Pareto Principle realize a limited number of triggers can result in the most problems. By visually displaying a Pareto Chart in graph form, teams can better acknowledge the pain that the significant few problems can inflict on a fundamental process. Compiling a chart for this information helps teams:

 

• To typically view the process problems at a glance
• Comprehend quickly all of the factors working against the process
• Concentrate fiercely on the problems that cause the most considerable disruption

 

Presenting a Pareto Chart in graphical form displays the specific types of problems that afflict the process and illustrates the relative significance of these problems.

 

Using the Pareto Chart as a guide, project teams can decide which problems to address first. Six Sigma teaches project teams to address problems that impact customers and profitability first. The Pareto Principle teaches that most of the problems in the process have just a few causes. The Six Sigma technique of creating a Pareto diagram supports this principle one step further and illustrates what these causes are and how much potential impact they have on the process.

 

One of the most common reasons charts are produced is the ability to promptly communicate a lot of data with an enormous group of people. The creation of a Pareto diagram will help to depict the exact problems or the causes of such problems that need to be addressed using various visual means.

The intended audience can view the Pareto chart and observe the most familiar issues, or the most common problems cause instantly.

The method makes it easier to communicate the different projects, which the company is supposed to undertake for success in improving the quality.

 

Steps for Making a Pareto Chart

 

Teams can convert the raw data into relevant information by following a series of steps.

 

• Proper identification of the potential problem under investigation.

 

• Listing the potential causes, where the existing data can be used or new ideas can also be brainstormed.

 

• Accurately measuring the problem with an easy-to-understand unit. The general one being the cost and frequency.

 

• Specifying the right period of time. This takes into account measuring the performance over a time period long enough to adequately capture the ideal situation. 

 

• Selecting a specific period of time that is long enough to balance out seasonality and shorter weekly fluctuations.

 

• Collecting data for each type of problem, where the data can be either current or historical.

 

• Precisely measuring the cost or frequency of each problem

 

• Displaying correctly the problems and their costs on a graph. The problems are to be plotted on the horizontal line of the graph and frequencies or costs on the vertical line and in descending order from left to right on the horizontal line. The problem with the highest frequency or cost is displayed at the far left of the horizontal line followed by the next most costly or frequent problem and so on.