Pareto Diagram. An application to ISO 9001:2000

This technique is used on a large scale because of its simplicity and the power of provided results. It may be used when you want to prioritize resources for a given problem or when you want to segregate major problems from minor problems. This technique comes from Vilfredo Pareto, an economist who in 19th century found that approximately 80% of the wealth and prosperity of Italian population was in the hand of 20% of the population. Further studies in a wide range of industry and problems shown that this rule, 80/20 is perfectly applicable.

A modern translation of this rule may sound like this: 80 percent from the total problems have a root in 20 percent of the total number of causes. Therefore, if you are focusing on those 20% causes and you will somehow prevent them, you will end up in solving 80% from total number of problems.

Applying this technique is simple. Guidance is provided below:

• collection of data related to identified problems (e.g. for 50 batches what are the nonconforming products);
• computing the total number of appearances of problems;
• rearranging the sums in descending order;
• computing the frequency for each type of cause;
• computing cumulated frequency;
• representing the data in the chart;
• interpretation of the chart.

Basic rules for interpreting the chart are:

• the important aspects on which you have to focus are on the left side of the chart;
• a steeper line of cumulating frequencies indicates a break in the range of plotted items. In other word the item in the left has a more crucial importance than the consequent item.

An example for application Pareto diagram is shown below.

Theme definition: Upon an internal audit, a number of non-conformances were found. The Quality Manager is interested in identifying which are the most relevant clauses to which the company is not complying, so that to focus especially on them.

Data collection:

No.	Area	ISO 9001:2000 Clause	Description
1	Sales	7.2.1	Inadequate determination of legal requirements
2		7.2.2	Insufficient determination of customer requirements for orders 5155, 5167, 5168
3		4.2.4	Incomplete records for customer orders no. 5155, 5167, 5168
4		6.2.2	Insufficient knowledge regarding applicable procedures for sales employees
5	Production	7.5.1	Three production employees are not wearing the protection equipment
6		8.2.4	Inspection of the product is not made according to documented specification
7		4.2.4	Record no F0244 is not visible enough
8		4.2.3	Drawing DS234221 not approved and found to be in use
9		4.2.4	Found a set of control sheets stored in inadequate conditions
10		4.2.4	Found control sheet records which are more than two years old, not destroyed yet
11		6.2.2	Training Plan not followed. No training was carried out within last two months

Grouping of collected data is made on standard clauses. The result is:

ISO 9001:2000 Clause	Number of nonconformances
7.2.1	1
7.2.2	1
4.2.4	4
6.2.2	2
7.5.1	1
8.2.4	1
4.2.3	1
Total	11

Sorting data in descending order and computing the individual and cumulated frequencies lead to:

ISO 9001:2000 Clause	Number of nonconformances	Frequency	Cumulated frequency
4.2.4	4	37%	37%
6.2.2	2	18%	55%
7.2.1	1	9%	64%
7.2.2	1	9%	73%
7.5.1	1	9%	82%
8.2.4	1	9%	91%
4.2.3	1	9%	100%

Representation of data is shown in the following diagram. As was stated initially, this type of chart helps you to prioritize things. Analyzing the chart induces the conclusion that the organization is facing two major problems. The biggest one is related to control of records and the second one is related to human resource management, in terms of training. All the other problems can be treated as incidental, however, without diminishing their importance. What the company has to do as a priority is to find solutions for proper recording of data and secondly, to do something for better knowledge of tasks and responsibilities. What's interesting is that improving these areas, other problems will be corrected almost automatically, like use only of approved documents and better documentation of customer requirements (these are as a result of training process, where more awareness will appear). This is a good example of better understanding of 80/20 rule (solving a main problem – left side of the chart – also solves other smaller problems).

Pay special attention to the following: the diagram is showing what is the "spread" of an issue, not strictly its gravity!!! To understand better this idea, lets' go back to our example. Is it a bad thing that several records are not as they should be? Obviously, the answer is yes. Is it a bad problem that employees does not know as it should be normal what they have to do? Obviously, once again the answer is yes. But which one of these two problem is worst than the other? Tough question... As was stated in the above paragraph, lack of training may lead to bad records. Therefore, training may become a priority of the company. Another aspect... How bad is that workers didn't wear their working equipment? Usually, this is a big problem, because it may lead to accidents, also to severe penalties for that. Even if in the diagram that was mentioned on the right side, the gravity of the problem is huge, therefore, it has to be corrected somehow...