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Pareto Charts – How to do pareto analysis using Excel?

April 26, 2012 Leave a comment

A Pareto chart or pareto graph displays the importance of various factors in decreasing order in columns along with cumulative importance in a line. Pareto charts are often used in quality control to display most common reasons for failure, customer complaints or product defects.

The principle behind pareto charts is called as pareto principle or more commonly the 80-20 rule. According to wikipedia,

The Pareto principle (also known as the 80-20 rule,[1] the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.

The pareto chart is a great way to do the pareto analysis. Today, we will learn how to use excel to make a pareto chart.

See an example pareto chart of visits to this website:

pareto chart example

(Please note that in this example, the 80/20 rule does not hold as I have chosen very small sample of data. In reality, the 80/20 principle applies to my website as well)

Making a Pareto Chart in Excel

In order to make the pareto chart in excel, first you must have the data ready. Once we have the values for each cause, we can easily calculate cumulative percentages using excel formulas. We will also require a dummy series to display the “cutoff %” in the Pareto chart.

I have arranged the data in this format. You can choose any format that works for you.

Pareto analysis - data

Once you have the data ready, making the pareto chart is a simple 5 step process.

1. Make a column chart using cause importance data

Make a column chart using cause importance data
In our case, we select the first 2 columns in the above table and then make a new column chart.

2. Add the cumulative %s to the Pareto Chart as a line

Add the cumulative %s to the Pareto Chart as a line
Select the third column, press ctrl+c (copy). Now select the chart and press ctrl+v (paste). Excel will add another column series to the chart. Just select it and change the series chart type to “line chart”. Learn more about combining 2 different chart types in excel combo charts.

3. Move the cumulative %s line to secondary axis

Move the cumulative %s line to secondary axischange to secondary axis

Select the line chart, go to “format data series” (you can also press ctrl+1) and change the axis for this chart series from “primary” to “secondary”.

4. Add the cut-off % to the pareto chart

Add the cut-off % to the pareto chart
Select the fourth column in our data table, copy and paste it in the chart. This should ideally be pasted as a new line chart. If not, follow step 2 for this as well.

5. Finally, adjust formatting to make the final pareto chart

Finally, adjust formatting to make the final pareto chart
Now, our basic pareto chart is ready. We should adjust the chart formatting to make it more presentable. Once you are done, the final output will be something like above chart

When to use Pareto Chart?

Pareto charts can be used,

  • During quality control to analyze the causes of defects and failures
  • When you want to focus your resources on few important items from a large list of possibles
  • To tell the story that attacking problem A might be better than solving problem C, D and F

Pareto charts and pareto analysis has great practical uses for almost anyone in a managerial role.

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