Pareto Analysis

Posted in Operations and Supply Chain Terms, Total Reads: 1526

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.


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