Posted By: Admin DreamingCode


Focus Operational Excellence Efforts with Pareto

Time – no one has enough of it. Yet all of us must continuously improve our processes to succeed in an increasingly competitive environment.To balance these competing facts we need to focus.And a simple, powerful tool for finding focus is the Pareto.The Pareto Principle, also known as the 80/20 rule, provides the focus you need to make significant improvements in business results even with the constraints of a challenging calendar.

The Pareto Principle

Vilfredo Pareto was an Italian economist who, in the late 1890's, noted the uneven distribution of wealth in Italy.He found that about 80% of the wealth was owned by 20% of the people.This uneven distribution held true in many other countries as well – both then and today.This 80/20 distribution of inputs to results also holds true well beyond economics and wealth distribution.Dr. Joseph Juran identified this and named it the Pareto Principle.He saw it as a way to distinguish the "vital few" from the "trivial many". Very often, we see a similar pattern across our businesses - 20% of customers drive 80% of sales, 20% of our products account for 80% of our sales, etc.The same unequal distribution also often holds true for quality issues, for example, 20% of the defect types account for 80% of the defects.This insight can help you identify the areas of focus that will deliver the most benefit to effort ratio.

Using Pareto thinking to focus your improvement efforts:

By process step – Draw a map of the process.The map level is generally aligned with your scope of responsibility.Your map may be a high level map that covers the key processes across the facility if you are the quality leader for the site; if you are a team leader, your map would be focused on just the process steps that your team works.

Plotting data - You can plot historical data on the map, you can use it to capture data real time, or a combination of both.As you begin plotting issue on the process map, it is very likely that you will see that the majority of your issues are clustered in and around just a few of your process steps.Focus on those steps.

Geographically – many safety officers use this approach to identify risk areas in their facilities.You can apply it outside of safety as well.Take a map or blueprint of your facility.Whenever an incident occurs, plot it on the map – a small red dot is a simple approach. This type of plotting to see if there are imbalances in occurrence across the facility is a type of concentration diagram.

A safety officer at a client of ours used this technique recently to plot accidents and incidents.His findings were somewhat surprising.Although he worked in a manufacturing facility, the "hot spots" he identified were not in the main production area. The two that showed up were at the front entrance to the building and near an entrance to the production area.He dug deeper into the incident reports for these areas and found that he had two different, but addressable problems.The front door area was a "hotspot" for slips and falls.Increased use of cleaning the area of snow and using de-ice and an awareness campaign have made a significant improvement in the problem.A long term solution being discussed includes changing the surface of just that area to be slip resistant even in inclement weather such as snow and ice.The problem with the entrance to the work area revealed itself with just one GEMBA observation.The entrance area and a fork lift path came close to each other at that spot. Although both had clear lane markings, when employees were first coming through the door and into the work area, they were often not fully focused and occasionally stepped into the fork lift path.The fork lift path was adjusted in that area to provide better separation.

Traditional stratification method- Stratify your defects by product type or by different product models, by type of defect, by component, etc.If one view of the data does not show you a Pareto effect, take a different perspective.A client was trying to solve an issue with a fan controller used in field vehicles.Stratifications by customer (do just a few customers account for most of the warranty claims?) and by model type (are the deluxe models too complicated for field use?) showed no Pareto effect.The client then did a plot of defect by area on the controller itself.The vast majority of failures were occurring on the bottom rear of the product (bottom, rear as it was mounted in the vehicles).This focus quickly led to the realization that the issues were associated with the area collecting water.A simple design change fixed the issue.

None of us is given more time – that still holds at 24 hrs/day.But we can get the most benefit for how we spend that time.Use the Pareto approach to find the "hotspots" in your business and focus there.Knowing where the concentrations – the 80/20 rule – issues are won't solve the problem – fortunately for us our skills in analysis are still required – but they will allow you to put your energy on the vital few and not on the trivial many.

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