PARETO – Vilfredo Federico Damaso Pareto born 15 July 1848 – 19 August 1923 born Wilfried Fritz Pareto, was an Italian, engineer, sociologist, economist, political scientist and philopher.
Pareto’s Principle or Pareto’s Law – The 80/20 Rule means that in anything a few (20 percent) are vital and many(80 percent) are trivial. In Pareto’s case it meant 20 % of the people owned 80 % of the wealth. 20% of the defects causing 80 % of the problems. Project Managers know that 20 % of the work (the first 10 percent and the last 10 percent) consume 80 % of your time and resources. You can apply the 80/20 Rule to almost anything, from the science of management to the physical world.
You know 20 % of your stock takes up 80 % of your warehouse space and that 80 %t of your stock comes from 20 % of your suppliers. Also 80% of your sales will come from 20 %t of your sales staff. 20 % of your staff will cause 80 % of your problems, but another 20 % of your staff will provide 80 % of your production.
Pareto’s Principle, the 80/20 Rule, should serve as a daily reminder to focus 80 % of your time and energy on the 20 % of you work that is really important. Don’t just “work smart”, work smart on the right things.
Pareto Analysis is a simple technique for prioritizing problem-solving work so that the first piece of work you do resolved the greatest number of problems. It’s based on the Pareto Principle (also known as the 80/20 Rule) – the idea that 80% of problems may be caused by as few as 20% of causes.
To use Pareto Analysis, identify and list problems and their causes. Then score each problem and group them together by their cause. Then add up the score for each group. Finally, work on finding a solution to the cause of the problems in group with the highest score.
Pareto Analysis not only shows you the most important problem to solve, it also gives you a score showing how severe the problem is.