Pareto Chart – Practical Guide in Detail

Introduction – Why Pareto Chart is important in Quality #

In manufacturing and automotive industries, hundreds of issues can affect product quality, from dimensional variations to process defects. But not all problems have equal impact. That’s where the Pareto Chart comes in.

A Pareto Chart helps you identify the vital few causes that contribute to the majority of problems. It’s based on the 80/20 rule, which states that roughly 80% of defects come from 20% of causes.

This makes the Pareto Chart one of the most powerful 7 QC Tools, helping engineers prioritize efforts, focus on critical issues, and drive effective problem-solving on the shop floor.

What is a Pareto Chart? – Concept Explained #

A Pareto Chart is a combination of a bar graph and a line graph.

• The bars represent the frequency or impact (such as number of defects or cost) of individual causes.
• The line shows the cumulative percentage, helping visualize how each factor contributes to the total problem.

The chart ranks causes from most significant to least significant, making it clear where to focus first.

Example: #

If you record 100 defects and find that 60 are caused by “welding issues,” 25 by “painting defects,” and 15 by “assembly errors,” the Pareto Chart will clearly highlight that focusing on welding and painting can eliminate most of your issues.

How to Create a Pareto Chart – Step-by-Step Process #

Follow these simple steps to build an effective chart:

Step 1: Define the Problem #

Start by identifying what you want to analyze, e.g., “Customer rejections by defect type” or “Line stoppages by cause.”

Step 2: Collect Data #

Gather data over a specific period. Data can be from inspection reports, process logs, or customer complaints.

Step 3: Categorize the Causes #

List each type of defect or cause (e.g., burrs, misalignment, color variation, missing components).

Step 4: Count and Sort #

Count how many times each cause occurs, and arrange them in descending order (highest frequency first).

Step 5: Calculate Cumulative Percentage #

For each cause:

Step 6: Draw the Chart #

• Use bars for each cause (X-axis = cause, Y-axis = frequency).
• Add a line graph for cumulative percentage.
• Highlight where the cumulative line crosses 80%, which represents the vital few causes.

Step 7: Interpret the Chart #

Identify top causes contributing to 80% of the problem, and prioritize them for corrective action.

Visual Suggestion:
🧾 Include a stepwise data table showing frequency, cumulative count, and cumulative percentage.

Real-World Example – Pareto Chart in Automotive Manufacturing #

Scenario:
A supplier to an automotive OEM finds high rejection rates in a motor assembly process.

Data Collected (Monthly):

You analyzed five defect types in a manufacturing process and found the following frequencies:

The total number of defects = 100.

Step 1. Sort defects in descending order of frequency.

Step 2. Calculate cumulative frequencies and percentages.

Step 3. Draw the chart.

Plot the Pareto chart

Interpretation From this chart:

• The first two categories (out of five), i.e., 40% of causes contribute to nearly 70% of total defects.
• These are your “vital few” causes that deserve immediate attention.
• The rest (Loose Connector, Paint Scratch, Label Missing) are the “trivial many” and still important, but lower priority.

What the Chart Tells You? #

Focus first on fixing Shaft Misalignment and Bearing Noise for example:

• For Shaft Misalignment: check jig alignment, motor mount tolerances, or shaft concentricity.
• For Bearing Noise: verify lubrication, preload, and assembly torque settings.

Once these high-impact issues are addressed, overall defect rates will drop significantly.

Real-World Key point

This chart visually supports data-driven decision-making.
It ensures your quality improvement team works on the few issues that matter most, not spreading efforts across minor defects.

Real-world excel example | How to create Pareto chart in excel? #

Let’s take an example,

1. We have the defect wise data for Tube assembly, as shown in the chart below

2. Arrange / Sort the data in largest to smallest number

3. Calculate the cumulative and % cumulative quantity in the chart

4. Select the columns of Defect, Quantity & % Cumulative, and insert the chart as shown in step below

Use combo chart

5. Now click on the cumulative line, right click and click on format data series & select the secondary axis option

6. Click on right side scale of cum. % then right click & then click format Axis and put values minimum as 0 & maximum as 100%.

7. Similarly select the left scale and put the values minimum as 0 & maximum as total quantity 2725.

8. Click on the bars to select them and right click, then select format data series and make gap zero.

9. Now you have the actual pareto chart, still final tuning is require… then you will get the final pareto chart as below.

• Add data label to cumulative line
• Write the specific chart title to represent the pareto chart

Finally, the conclusion from this chart is the 20% of the defect category i.e. Crack, Hole undersize, Loose fitment & Hole oversize contribute our 80% of defective quantity (Rejection).

Advantages of Using Pareto Chart #

• Helps to prioritize the most impactful issues.
• Simplifies complex data for quick decision-making.
• Promotes data-driven problem-solving.
• Saves time and resources by focusing on major contributors.
• Easy to create using Excel or statistical software.

Limitations of Pareto Chart #

• Shows what problems are significant, but not why they occur.
• Effectiveness depends on data accuracy.
• Not suitable for causes with low frequency but high risk.
• Needs regular updates to remain relevant.

Best Practices & Expert Tips #

• Use Pareto Charts early in problem-solving (e.g., before Fishbone or 5 Why analysis).
• Combine with Check Sheets for data collection.
• Use Control Charts later to confirm improvement sustainability.
• Always define time frame and data source clearly.
• Review and update the chart after implementing corrective actions.

Check Sheet → Pareto Chart → Fishbone Diagram → 5 Why.

Common Mistakes to Avoid #

• Using small or biased data for analysis.
• Combining unrelated causes (e.g., mechanical and electrical).
• Ignoring cumulative percentage in your interpretation.
• Focusing on cosmetic issues instead of recurring issues.
• Forgetting to verify improvement after corrective action.

Checklist / Template for Pareto Chart #

Downloadable Resource/file: Download Free Pareto Chart Excel Template #

Summary – Key Takeaways #

The Pareto Chart is a simple yet powerful tool to identify and prioritize major problem areas.
By applying the 80/20 rule, quality engineers can focus efforts on high-impact causes, save time, and achieve faster quality improvement.

In short:
✔ 80% of problems come from 20% of causes.
✔ Focus on what matters most.
✔ Use Pareto Chart as your first step toward data-driven improvement.

Frequently Asked Questions (FAQ) #

Want to start using Pareto Charts in your plant?

Download the free Pareto Chart Excel template and explore the next QC tool – Cause and Effect Diagram to continue your quality improvement journey.