Project Management

Pareto analysis can be used when you encounter multiple related problems or a common problem with multiple causes. In this technique you are also able to collect metrics on how many times each problem or cause occurs. The purpose of Pareto Analysis is to observe the problems and determine their frequency of occurrence. This, in turn, gives you the information you need to prioritize your effort to ensure you are spending your time where it will have the most positive impact.

Pareto Analysis is based on the classic 80/20 rule. That is, 20% of the problems cause 80% of the occurrences. For example, let's say you have a problem with a product failure, based on a number of causes. Through observation and collecting metrics, you determine there are eight causes. Rather than attacking the causes randomly, a Pareto Analysis might show that 80% of the problems are caused by the top three causes. This gives you information to know which causes to solve first.

The tool associated with this problem solving technique is the Pareto Diagram. It is a chart, graph or histogram showing each problem and the frequency of occurrence. It is created as follows:

1. Create a table listing all observed problems or causes.

2. For each problem, identify the number of occurrences over a fixed period of time.

Problem 1	115
Problem 2	25
Problem 3	50
Problem 4	5
Problem 5	5
Problem 6	15

3. Arrange the problems from highest to lowest, based on the number of occurrences.

4. Create a new column for the cumulative total.

Problem 1	115	53%
Problem 3	50	77%
Problem 2	25	88%
Problem 6	15	95%
Problem 4	5	98%
Problem 5	5	100%

Notice that this gives you important information. Even though there are six total problems identified, you need to resolve problems #1 and #3 first (all things being equal). That is where you will achieve the most impact. If you decided to work on problems #4 and #5 instead, the result of your effort would be almost meaningless. This does not mean that you do not want to resolve the other problems. However, this Pareto Analysis gives you information to know the order in which the problems should be resolved. It also provides a sense as to the relative value you receive for resolving each problem. You definitely do not want to spend the same amount of effort resolving problem #5 as you do for problem #1. They payback just isn't there. (Of course, you may determine that problem #6 can be resolved quickly and you may choose to solve that one early. The Pareto Diagram does not tell you what to do. It provides information to you so that you can make the best decisions.)

Many times, you will see the results of the Pareto Diagram displayed as a histogram or bar chart. This provides more visual emphasis to the data you have observed.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Weekly Anagram

Let's have some fun! See if you can unravel this anagram. (Anagrams are a word or phrase formed by reordering the letters of another word or phrase, such as satin to stain.)

A condition where there is no excess time between activities

ART ELF ZOO: _ _ _ _ | _ _ _ _ _

Last Week's Anagram.

A term coined by the consultancy KPMG to identify mainly IT projects which resist termination. Typified by a constantly changing specification and absorption of much extra resource and cost in a desperate effort to get the project finished

TOUCAN JAW PRYER: RUNAWAY PROJECT

Wideman Glossary Term of the Week - Bid Evaluation

• A comparison of bids received, including an assessment of the validity of each compared to the tendering requirements.

• Review and analysis of response to determine supplier's ability to perform the work as requested. This activity may include an evaluation of suppliers financial resources. ability to comply with technical criteria and delivery schedules, satisfactory record of performance and eligibility for award.

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Labels: Pareto analysis