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The Pareto Story

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I would like to dedicate this article to Dr.Joseph M Juran who passed away recently on the 28th of Feb 2008; he was 103 years old and was physically and mentally active until his death. He has made great contributions to company wide quality and he was the one who gave the name "Pareto" to the principle of "vital few and trivial many".

As most readers would know, the concept is very simple, that is, a "vital few" contributes to a problem account for most of the total size of the problem. The remaining contributors (the "trivial many") account for a small part of the total problem. Simple though, I find this a very powerful and extensively used tool in manufacturing industries for problem solving and in six sigma projects. Many times it is useful to do a first level pareto and then dig deeper by a second level pareto for each of the vital contributors from the first.

Dr.Joseph M Juran gave the name "Pareto" to the principle of "vital few and trivial many".

Dr. Juran says in one of his books that he was forced to confess that he had mistakenly applied the wrong name to the principle. In the mid 1920s he observed that when a long list of products was arranged in the order of frequency, a relative few of the defects accounted for the bulk of the defectiveness. Later when he moved into quality management work in the late 1920s and the 1930, he observed that a similar phenomenon existed with respect to employee absenteeism, causes of accidents, etc; many other people also had observed this. Mr.Merle Hale, who presided over the executive salary program of General Motors, showed Juran a research he had conducted by comparing the salary pattern prevailing in General Motors with one of the mathematical model which Paerto had once constructed. Vilfredo Pareto, a distinguished Italian economist, had made extensive studies of the unequal distribution of wealth, and had in addition formulated mathematical models to quantify this maldistribution.


In 1940 when Juran brought out the "Quality Control Handbook", he addressed this principle under the heading "Maldistribution of Quality Losses" and he put a caption, which read "Pareto's principle of unequal distribution applied to distribution of wealth and to distribution of quality losses" Though Pareto's contribution specialized in the study of wealth, it was Juran who generalized the principal of unequal distribution into a universal; and also coined the phrase "vital few and trivial many". He could have also called it "Juran Principle". It is to be noted that numerous people, over the centuries, observed the existence of the phenomenon of vital few and trivial many to their local sphere of activity; and it was Lorenz who developed the cumulative cure to depict the distribution of wealth graphically, but Juran applied the curve to depict the universal in graphic form.


For readers who are not familiar with the Pareto principle, let me give a small example on the practical application. Let's consider defects in washing machines sold in a city, as listed in the table below. If we arrange all the defects in a descending order, and calculate the contribution of each defect as a percentage of the total defects, then the cumulative percentage will help draw the cumulative curve as shown in the graph. We could obtain this using Microsoft Excel or using statistical software like Minitab. In the Minitab graph below you will notice that all defects are organized in a descending order using a bar graph and looking at the cumulative percentage we notice that the first three defects contributes to 85% of the problem; which indeed are the vital few causes.


                                                          Defect Quantity
              No Pumping Action 73
              Defective Motor 274
              Filter Blocked 19 
              Leaky Gasket 40
              Crack on door 8
              Body vibration 12
              Defective Hose 10
              Noisy 4
              Poor wash quality 15

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Pradeep Kumar E.T. A Master Black Belt in Six Sigma , is the Country Manager- Operational Excellence with Tyco Electronics Corporation India Pvt Ltd.
Sourced from
www.businessgyan.com

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