2.1 Pareto Chart

Welcome back. This is Problem Solving and Decision Making, University of California, Irvine. Once again, I’m Rob Stone. In this module, we’re going to talk about some tools that actually help us figure out where our problems are. What’s causing our problems? Where we should look for solutions. It doesn’t show, these tools don’t show us how to actually decide things. They show us where to focus our efforts. We’re gonna look at a Pareto Chart. Going to look at Cause and Effect Diagrams. We’re going to look at histograms. First of all a Pareto Chart. Well, there was a gentleman named Vilfredo Pareto. Lived in Italy. Late 1800s early 1900s. He was looking around and realized that 80% of the wealth of Italy in 1906 was controlled by 20% of the population. So he came up with the 80/20 rule. But we hear the 80/20 rule all the time. That’s what that’s all about, it’s where it came from. What it says is that, most of our problems are caused by a very small percentage of actual causes themselves. So, most of our problems come from very small number of causes. We want to find those small number of causes, deal with those, and most of our problems will go away. Pareto chart is a vertical bar chart and we’re gonna look at a couple of bar charts. But this one, the tall bar is out on the left side of the bar. And then they’re in descending order from there. Why are we gonna do that? We’ll show you in just a little bit. What does this show us? Information in a descending hierarchical order. It shows us priorities of things. Identifies issues that cause our problems. It can help us focus our efforts so we’re working on the most important things. We’re not off wandering around working on some little trivial issue that’s really not going to do much for us if we take care of that. So what does a Pareto Analysis look like? Looks like one of these things. We have some bars. Tall bar out on the left side. And the small bar out on the right side. It’s used for problem solving. Data is put into different categories and then it’s ordered starting with the most problematic. Let’s take a look at a restaurant. We have a problem at a restaurant. We get complaints at our restaurant. So we start to gather some information about that. What, what are the complaints? Why are people complaining about this? Some people are gonna complain, sometimes, about bad food. Some people about bad service. Some people about bad noise. There’s all different kinds of things that people complain about in restaurants. Why are they complaining about our restaurant? Well, parking problems. If we look at the 257 complaints we have in a certain period of time. 112 of them are parking problems. That’s the tall bar out on the left. It’s the 112 tall bar. The next bar, we got rude waiters. So people were having a hard time parking. Then they get in there, and you get a rude waiter. So right away, it’s probably not a very good experience. Now, there’s some problem with their food. The food isn’t cooked right. It’s cooked too much, it’s not cooked enough. Something’s wrong with it. Then, some people complain about the restaurant being noisy. Some people say the food is cold. My father, my mother in law seems like elderly people, they eat too slow and so their food gets cold. And so I was complaining the food is cold. It wasn’t cold when it came out but it is now. So we complain about cold food. We kook at a number of different issues along the way here to find out okay, so what’s the main problem? If we take a look at our chart now. We say we have these three issues up here. If you take a look at this, these three issues are the tall bars. They are gonna account for almost all of the complaints we have in the whole restaurant. This is called the vital few. And we also have the trivial many. There was one of the people involved working with these Pareto charts later on. Per, Vilfredo Pareto, the one who was working with this, said the vital few and the trivial many and a number of other people worked with those. And then one fellow, Joseph Juran came along and said it is not the trivial many it is also the important many. If we can also get rid of all of those then we also have a world class five star restaurant. Let’s take a look at this. We have 257 complaints. 112 of them we’re gonna do some simple math here. 112 of them are because of parking. So we’re going to get a percentage here. We’re going to get an accumulated percentage to find out where we need to focus our efforts. What it says here is that 43.6% of our problems come simply from parking, so almost half of the problems we have, half of our complaints are coming from parking, bad parking. Now we’re also going to add the rude waiters. We’re gonna put the two of those together. So when we put the two together, add the, add them up, we come up with now a total percentage of these two, 72%. 72%, almost three quarters of the complaints we get are simply from these two issues. Parking and rude waiters. Let’s add one more just to see what kind of accumulated percentage we get. So we add one more, the cooking problems. We add that. The three of those together, the percentage of the complaints that those three account for is 91.5%. So we have almost all of our complaints coming from three things. So we can go try and find new and better coffee because some person griped about that last night. So we can run around all over trying to find better coffee. Why? That’s not gonna make our restaurant better. That’s not gonna reduce our complaints. You know? We can try and figure out, something to do about the wait time. Doesn’t make any difference. That’s not going to make our restaurant better. What’s going to make our restaurant better? Let’s figure out something about parking. So, we may have to put in valet parking. We may have to figure out new parking spaces. Build a new parking lot. Who knows what we’re gonna do? Maybe we’ve got a dirt lot behind and we could cover that over and make it into a paved parking lot, solve our problems. We don’t know. We just need to figure out where the problems are and then go fix them. We put all the rest of them in here, and we have, we have 100% of our problems are caused by these complaints right here. This is all of our complaints. Looking at the first three, take care of those, people are gonna be happier with their restaurant. When we look at categories of problems, what we want to do is tabulate the data like we did, we put, put all of our complaints down on the charts. Said bing, bing, bing, these are the complaints. Then we wanna plot it on the chart, put it on our chart, say okay, this is what it looks like. And then we understand and act on the results. So now we know of three things that cause most of our problems. We go fix those and we’re in a lot better shape.