Abstract

Pareto charts are frequently used in firms to isolate areas where the most benefits can be obtained from quality and productivity improvement efforts. This standard Pareto analysis is not based on statistical principles even though the data analyzed are samples from a manufacturing or service process. Using data from a large manufacturing firm, we show the deficiencies of this type of analysis and present a statistical analysis method. It is shown that management can make very different decisions on the efforts of quality and productivity improvement as a result of the method of analysis used.