Browse Definitions :
Definition

Pareto chart (Pareto distribution diagram)

A Pareto chart, also called a Pareto distribution diagram, is a vertical bar graph in which values are plotted in decreasing order of relative frequency from left to right. Pareto charts are extremely useful for analyzing what problems need attention first because the taller bars on the chart, which represent frequency, clearly illustrate which variables have the greatest cumulative effect on a given system. 

The Pareto chart provides a graphic depiction of the Pareto principle, a theory maintaining that 80% of the output in a given situation or system is produced by 20% of the input. 

The Pareto chart is one of the seven basic tools of quality control. The independent variables on the chart are shown on the horizontal axis and the dependent variables are portrayed as the heights of bars. A point-to-point graph, which shows the cumulative relative frequency, may be superimposed on the bar graph. Because the values of the statistical variables are placed in order of relative frequency, the graph clearly reveals which factors have the greatest impact and where attention is likely to yield the greatest benefit.

A Simple Example

A Pareto chart can be used to quickly identify what business issues need attention. By using hard data instead of intuition, there can be no question about what problems are influencing the outcome most. In the example below, XYZ Clothing Store was seeing a steady decline in business. Before the manager did a customer survey, he assumed the decline was due to customer dissatisfaction with the clothing line he was selling and he blamed his supply chain for his problems. After charting the frequency of the answers in his customer survey, however, it was very clear that the real reasons for the decline of his business had nothing to do with his supply chain. By collecting data and displaying it in a Pareto chart, the manager could see which variables were having the most influence. In this example, parking difficulties, rude sales people and poor lighting were hurting his business most. Following the Pareto Principle, those are the areas where he should focus his attention to build his business back up. 

pareto chart

See also: flowchart, histogram

This was last updated in March 2011

Continue Reading About Pareto chart (Pareto distribution diagram)

SearchCompliance
  • OPSEC (operations security)

    OPSEC (operations security) is a security and risk management process and strategy that classifies information, then determines ...

  • smart contract

    A smart contract is a decentralized application that executes business logic in response to events.

  • compliance risk

    Compliance risk is an organization's potential exposure to legal penalties, financial forfeiture and material loss, resulting ...

SearchSecurity
  • email spam

    Email spam, also known as junk email, refers to unsolicited email messages, usually sent in bulk to a large list of recipients.

  • security policy

    A security policy is a document that states in writing how a company plans to protect its physical and information technology (IT...

  • shadow password file

    A shadow password file, also known as /etc/shadow, is a system file in Linux that stores encrypted user passwords and is ...

SearchHealthIT
SearchDisasterRecovery
  • What is risk mitigation?

    Risk mitigation is a strategy to prepare for and lessen the effects of threats faced by a business.

  • change control

    Change control is a systematic approach to managing all changes made to a product or system.

  • disaster recovery (DR)

    Disaster recovery (DR) is an organization's ability to respond to and recover from an event that affects business operations.

SearchStorage
  • bare-metal restore

    A bare-metal restore (also referred to as bare-metal recovery or bare-metal backup) is a data recovery and restoration process ...

  • mSATA SSD (mSATA solid-state drive)

    An mSATA SSD is a solid-state drive (SSD) that conforms to the mSATA interface specification developed by the Serial ATA (SATA) ...

  • network-attached storage (NAS)

    Network-attached storage (NAS) is dedicated file storage that enables multiple users and heterogeneous client devices to retrieve...

Close