Businesses worldwide utilize Pareto chart analysis to identify the business consequences and their relative effects. This helps them overcome various limitations and steadily attain perfection.

A Pareto Chart is a special case of a bar graph with a combination of line graphs. It is a chart where bars represent the discrete values in decreasing order, and the line graph represents the cumulative total.

This chart is based on the Pareto Principle, which says that 80% of results come from 20% of the causes. Vilfredo Pareto, an Italian economist, was behind this observation. Since this chart works on the Pareto Principle, it is called the Pareto Chart.

Pareto charts

In simple terms, a Pareto chart enables us to identify consequences’ frequency and their cumulative effect. With the help of this chart, businesses can determine their limitations and prioritize the areas that need early improvements.

Different Components of the Pareto Chart

A Pareto chart has the following components or parameters for input:

  • The bars and a line are the most basic components of a Pareto chart that represent the data.
  • Each bar represents a type of problem, defect, or consequence. The height of the bar is a representation of cost or occurrence frequency.
  • The bars represent the values of every category in descending order. It means the chart starts from the tallest bar and ends with the shortest bar.
  • The line showcases the cumulative percentage of defects.

Uses of Pareto Chart

You may want to analyze a pattern that is having a negative or positive impact on the business. Thus using various resources and data available, a Pareto Chart analysis can help you effectively determine your business priorities. The uses of these charts are not limited to a particular industry; it is applicable in a wide variety of fields. Some of its applications include:

  • Identifying the areas from where the most quality issues of the business products or services are coming from.
  • Exploring and leveraging bigger customer accounts and so maximizing sales.
  • Solving service or product complaints problems by analyzing the occurrence and frequency of the problem.
  • Prioritizing key areas where business needs immediate improvement to satisfy customers or business partners.
  • Exploring business opportunities such as analyzing major funding reasons and key reasons for major traffic to the business etc.
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Let’s take an example to better understand Pareto chart uses. It is ideal for project managers if they want to:

  • Identify the 20% of the tasks that will be impacting the project. According to their higher or the lower impact, they can be prioritized afterward.
  • Identify 20% of the tasks that will take most of the time to complete. So the project manager can then allocate more time to those tasks.
  • Identify 20% of the risks or consequences with the highest effect on the business. After this identification, they can prepare a plan to eliminate the impact of those risks.

How to Make A Pareto Chart?

Pareto charts

Here are the steps involved in creating a Pareto Chart.

  • Decide the specific categories of various causes or factors and group them according to those categories.
  • Select the right type of measurement, i.e., cost, frequency, or quantity.
  • The next steps involve deciding the time, such as a week, day, or hour.
  • For each category of causes or factors, utilize the collected data and calculate the subtotals.
  • Now build the bars so that the tallest bar comes to the left and the smallest to the right.
  • For each category of subtotals, calculate the percentage by dividing by the sum of all category values.
  • You need to calculate the cumulative sums from left to right and then draw the line graph. This will represent the sums against the percentage.

Here are some of the best tools to make a Pareto chart.

VisualParadigm

VisualParadigm offers an online Pareto chart maker that quickly analyzes your data and turns it into a Pareto chart. It has several chart templates you can customize to add your personalized data. It brings you a big collection of icons and photos to add spice to your design. With drag and drop tools, you can easily adjust the chart values.

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VisualParadigm collection carries over 50 professional chart varieties you can choose from for your project. It also enables you to apply suitable effects to your chart to match your brand. With this Pareto chart maker tool, you can easily publish, download, and share your chart online.

Mathcracker

Mathcracker is a graphical tool that helps you in building Pareto charts online. You just need to enter the data in the text boxes provided on this portal. Based on the data you will enter, it comes up with a chart in seconds.

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Its online interface has three text boxes where you can enter your data. In the first text box, you need to enter the data in the form of values separated by a comma. The second text box asks you to enter categories separated by a comma. The third text box is meant for the title. The first field is compulsory to make a Pareto chart. The other two fields are optional.

ChartExpo

ChartExpo is available for download in two versions. One is for visualizing data from Google Sheets, and the second one is for MS Excel. Both the versions are paid with a monthly fee. You can try any of these two versions for a 7-day trial period.

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With the ChartExpo tool, you can effortlessly visualize data in a Pareto chart format to get help in decision-making. You can easily customize your charts and publish them on blogs, websites, or more. It interprets your google sheets or excel data and creates a Pareto chart in a few clicks.

Qtcharts

Qtcharts is an easy-to-use Pareto chart-building tool that lets you enter data online and create a chart instantly. This online tool comes with pre-defined fields in which you need to add your data.

Qtcharts

Qtcharts also offer downloadable desktop and mobile software to help you create charts. This software is available free of cost and offers the easiest way to quickly create watermark-free charts.

Creately

Creately offers a beautiful Pareto chart template that you can customize according to your data. The chart template is available as a diagram that you can edit with its easy diagram editor. It allows you to export the resultant chart in multiple picture formats.

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To edit this Pareto chart template, sign up to Creately or just sign in if you are an existing user. Now you need to edit the template with your own values, and your chart is ready to download.

Conclusion

Pareto charts can be very effective in improving business limitations and identifying opportunities. Creating Pareto charts is no more hassle if you consider choosing these efficient tools. So, utilize these fantastic tools and visualize data most effectively.