Pareto Analysis, also known as the 80/20 Rule, is a decision-making framework that helps prioritize tasks based on their impact. It operates on the principle that 80% of effects come from 20% of causes. Organizations and individuals use it to identify the most important factors in their processes, focusing resources on areas that yield the most significant results. This approach helps in optimizing efficiency and effectiveness in various operations.
Identify and list all inputs or causes that contribute to the problem. | Measure or estimate the impact of each input. | Rank the inputs from the most significant to the least based on their impact. | Identify the top 20% of inputs that are causing 80% of the problem. | Focus efforts and resources on addressing these key inputs.
Regularly update data and assumptions used in the analysis | Combine with other analytical tools for comprehensive insights | Ensure broad and accurate data collection to avoid bias
Helps in identifying the most impactful factors | Efficient use of resources by focusing on key areas | Simple and easy to understand and implement
Can oversimplify complex situations | May ignore less significant but still important factors | Relies heavily on the accuracy of data
Prioritizing problems to solve in project management | Allocating resources in operations management
When dealing with equally important multiple small issues | In situations where data is insufficient or highly skewed