14. Pareto Analysis

Vilfredo Federico Damaso Pareto was a nineteenth century renaissance man. He was an Italian engineer, sociologist, economist, political scientist, and philosopher. He made several important contributions to economics and he also contributed to the fields of sociology and mathematics. But, more important for our purposes, he is also known for the 80/20 rule, named after him as the Pareto principle. For continuous improvement purposes, the 80/20 rule states that 80% of the problems are due to 20% of the causes. For example, a few suppliers were responsible for most supplier-related quality problems. When you are trying to improve a process, the Pareto Principle is an excellent way to sharpen your focus to the critical few sources that are causing most of the problems.