Posted in Operations and Supply Chain Terms, Total Reads: 1669
Definition: Pareto Analysis
Pareto analysis is a technique used in decision making based on the Pareto principle which is also known as the 80/20 rule. This technique statistically separates out a limited number of input factors which will have greatest impact on an outcome.
Pareto principle says that 80% of a project’s benefit can be achieved by doing only 20 % of the work or in other way 80% of the problems can be traced to 20 % of the causes. Typically it shows that a disproportionate improvement can be achieved by ranking various factors or causes and then working on those 20% which will have the greatest impact.
Eg: In project management on can identify the 20% of the risk which can have the greatest impact on the project instead of focusing on all the risks.