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The Pareto Principle - The Vital Few and Trivial Many - The 80/20 Rule

However paraphrased; pareto is a simple management tool with wide business application. It can provide valuable information, which allows us to focus on the vital few, rather than the trivial many. As an example of the basic rule: 80% of customer complaints are caused by 20% of our products or services and this is where we should concentrate our improvement efforts.

The 80/20 theory was first developed in 1906, by Italian economist and sociologist, Vilfredo Pareto, who observed an unequal distribution of wealth and power in a relatively small proportion of the total population.

Joseph M. Juran
is credited with adapting Pareto's economic observations to business applications and in 1950; he published "The Quality Control Handbook," which first recognised the applicability of the Pareto principle in the context of inventory management. As a credit to Pareto's work, Juran named his finding 'The Pareto Principle'.

How to - Pareto Chart (pdf 94 kb)
The guide includes an overview of pareto charts, when to use them, how to use them, how to interpret results; as well as exercises for getting started...
The US Navy Total Quality Leadership Office

Continual Improvement Tools & Techniques
A Guide for Business Improvement

Continual Improvement Tools & Techniques: A Guide for Business Improvement
View larger image

This guide explains how to carry out more than twenty tools & techniques necessary to ensure your business continually improves.

Topics covered include:

Affinity diagrams, Bar charts, Black & white charts, Brainstorming, Cause & effect diagrams, Design of Experiments (DoE), Failure Mode, Effect and Criticality Analysis (FMEA/FMECA), Fault Tree Analysis (FTA), Five WHY’s for root cause analysis, Five Ws & one H for problem definition, Flow charting, Histograms, Pareto analysis, Pictograms, Pie charts, Plan-Do-Check-Act (PDCA) cycle, Quality Function Deployment (QFD), Rating, Repeatability and Reproducibility tests (R&R), Run charts, Significance testing, Solution effect diagrams

Also includes a handy matrix showing when to apply which tool & technique.

Further reading

The Memory Jogger II: A Pocket Guide of Tools for Continuous Improvement

The Memory Jogger II: A Pocket Guide of Tools for Continuous Improvement
Michael Brassard

This handy Pocket Guide uses graphics and easy-to-understand text to describe what the tools are, why they’re used, and how to use them. Tools are explained using real-life examples from all types of organisations, making them easy for everyone to understand and apply. The 22 Tools covered are
Activity Network Diagram, Affinity Diagram, Brainstorming, Cause & Effect (Fishbone), Check Sheets, Control Charts, Data Points, Flowchart, Force Field Analysis, Histograms, Interrelationship Digraph (ID), Matrix Diagram, Multivoting, Pareto Chart, Prioritization Matrices, Problem Solving Model, Process Capability, Radar Chart, Run Chart, Scatter Diagram, Team Guidelines, Tree Diagram, Process Decision, Program Chart, Nominal Group Technique (NGT).

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Arthur Hafner
For a straightforward overview of the 80/20 rule, visit the site of Arthur Hafner, Professor and Dean of University Libraries in the US. Arthur provides an excellent insight into the 80/20 rule as well as several examples where the rule applies...

The University of Melbourne Department of Economics
Biography of Vilfredo Pareto with links to other resources...

United States Department of Energy Handford Site
Excellent overview of Pareto Charts with a good and bad example...






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