### 6Sigma Tools: Pareto Analysis

The Pareto principle, most commonly known as the 80-20 rule, is known by business owners as the simple fact that 80% of your problems are caused by 20% of the people. Really the theory was about wealth and power distribution, but the general premise applies. Most of your issues can be attributed to a fairly small distribution of root causes.

What does it look like?

What does it do?

A Pareto Charts work in levels to help you identify the root cause of the tallest bar (the biggest issue).

How do I use it?

The trick with Pareto is to start high and whittle away. What does that mean? It means that when you find out department A is supplying department b with all of the material that ends up in their rework, don’t go to department b and shut everything down. I know that it seems counterintuitive, but jumping the gun before you find out why that material ends up in the rework pile, leads to rework on department a’s part, causing more defects.

What doesn’t it do?

Pareto doesn’t provide an instant Ah-ha moment, it’s a method that requires patience and adherence to the process to be effective. If you need the answer now, it may not be the method for you. You may be better suited to process mapping or the 5 Why’s which will point you in a direction immediately. I have to say however, if you want the right answer validated by numbers then Pareto is right for you.

In 6Sigma the devil is in the details and a successful improvement initiative depends heavily on the selection of the right tool for the engagement. A successful selection depends heavily on the knowledge and skill of your belt, so use that library of knowledge and if that belt isn’t asking you a thousand questions about your end goal-move on!

- Published in Change Management, Continuous Improvement, Operational Excellence, Six Sigma, Six Sigma Tools

### Using the Pareto Chart

You hear about this rule all the time from management, human resources and just about any business guru you can think of, so what exactly is it and how do you use it? The Pareto Chart, based on the Pareto Rule (commonly called the 80/20 rule), is an economic distribution principle named after Italian engineer Vilfredo Pareto, which showed 80% of land wealth was held by 20. Business has adopted this principle to say that 80% of the problems are caused by 20% of the people.

**What you need to know**

The Pareto Chart measures specific data in broad concepts and puts the information into a summary you can interpret a little easier. If you want to measure how often a process stalls or how many times red comes up in a sea of blue, then this is the method for you. When you use this method, before you begin you should decide how you want to group the items you’re measuring and how that measurement will happen. Ask yourself, am I measuring by weeks, days or hours? This distinction will make a difference in your results so you will need to find the most appropriate one.

## When you should use it?

You should use the Pareto Chart when you are trying to find the frequency of something, say how often customers return a specific product or the reasons why the product is delivered late.

## What a Pareto Chart looks like:

When you’ve gathered your data, you will use that information to create a Pareto Chart. An example of what a Pareto Chart might look like is below.

There are more steps involved in creating a Pareto Chart, but this post should give you some insight into what it is used for and why it is used.

- Published in Change Management, Continuous Improvement, Operational Excellence, Six Sigma

### Analysis of Variance – Tools of the Trade

Around the world in dozens of offices, someone was trained and then given Six Sigma projects. Some were trained well and recognize that you won’t use every Six Sigma tool for every project. Some were trained by a self-important belt who taught them to use every single Six Sigma tool there is.

So what I want to talk to you about this week are the tools we belts use, how to use the tools of the trade and which situations they are most appropriate for. Let’s make this a series and focus on one tool weekly. To start with we’ll talk about ANOVA. I had a conversation with a fellow belt about this tool and we had the same consensus, it is quite possibly the most hated Six Sigma tool; so here’s what you need to know.

## What is the Analysis of Variance?

ANOVA stands for Analysis of Variance and it’s used to highlight experimental differences. In English that means that ANOVA is used to highlight the differences between 2 or more sets of data.

## What’s the best use?

Since the goal of ANOVA is to highlight differences, the best use for ANOVA is when you have 2 or more distinct sets of data that you need to get information from. So ANOVA is not appropriate when you don’t know what you’re measuring or how you are going to measure it. If you are thinking about using ANOVA you should be fairly far along in the Six Sigma project lifecycle.

There are three types of ANOVA models: fixed effects, random effects and mixed effects. Fixed effects are measurements for scenarios with a specific outcome. Random effects are measurements without specific outcomes, so basically you can throw a change in the process and see what happens. It is good for risk identification and will help you plan how potential problems affect the process. The final model is a mixed effect model, this model is a great way to gauge you ability to respond. It has a mixture of specific outcomes and random outcomes; a great way to keep the Six Sigma project team on their feet.

## What does ANOVA look like?

How you statistical data will appear.

How your data will be displayed in a chart.

Now there is way more to ANOVA than this little summary, we didn’t cover error types, t-tests or variance types. For specifics-see your belt. This is just a summary to give you some basic knowledge on ANOVA and what it is supposed to accomplish, so now you can understand what your belt is and isn’t telling you.

- Published in Six Sigma

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