Pareto Principle - Application in Problem Analysis Solving

Pareto problem solving approach, and pareto charts are named after the Pareto principle which in turn was named after Vilfredo Pareto or the application of the Pareto principle in problem solving and analysis can provide a great starting point and an early insight into problem causes and effects without intense analysis.

For those not familiar with the Pareto principle, it states that 80% of effects or consequences are the result of only 20% of causes. This principle has been widely observed in business and around socio economic issues. For example in many cases 80% of business revenue is usually achieved through only 20% of products. The Pareto principle can be observed and applies in other lean concepts such as ABC Warehousing, production downtime, production planning, statistical quality control, supply chain design and other operations management areas. In all these cases 80% of the issues, plant throughput, deviations, and sales volumes are in most cases caused by only approximately 20% of the product range, possible causes, or faults. This principle can provide a starting point and economical problem/issue resolution approach of the most common problems in a production plant, business or process.

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