Monday, September 20, 2010

Pareto Analysis 80/20 Rule

Pareto Analysis is a statistical technique in decision making that is used for the selection of a limited number of tasks that produce significant overall effect. It uses the Pareto Principle (also know as the 80/20 rule) the idea that by doing 20% of the work you can generate 80% of the benefit of doing the whole job. Or in terms of quality improvement, a large majority of problems (80%) are produced by a few key causes (20%). This is also known as the vital few and the trivial many.

The 80/20 rule can be applied to almost anything:

•80% of customer complaints arise from 20% of your products or services.
•80% of delays in schedule arise from 20% of the possible causes of the delays.
•20% of your products or services account for 80% of your profit.
•20% of your sales-force produces 80% of your company revenues.
•20% of a systems defects cause 80% of its problems.

Sounds quite interesting.........