Pareto analysis is a handy analysis to help clarify how to allocate resources. The basic idea to to identify a small proportion of items or results that are disproportionally responsible for the overall outcome. For example the 20% of customers that are responsible for 80% of your companies sales. The pattern is also known as the Pareto principle, Pareto’s law, the 80/20 rule, the principle of least effort, and the principle of imbalance. The 80/20 principle was discovered in 1897 by the Italian economist Vilfredo Pareto. Vilfedro was researching the distribution of wealth in England and found that 80% wealth was controlled by 20% of the population. In the 1960’s, IBM reportedly used the principle when they identified the 20% of the Operating System code of their mainframe computers that carried 80% of the workload. They then rewrote that 20% of the code so the OS would run quicker. This gave them a performance edge and contributed to their early domination of the computer market.
This video post demonstrates how to quickly run a Pareto analysis in Excel.
Great writing!
My regards
Wilfred
Hi i want to make the pareto analysis for some of the defects .please provide me the excell sheet with 80-20 ratio.