Pareto analysis is a prioritization technique that identifies the most significant items among many. This technique employs the 80-20 rule, which states that about 80 percent of the problems or effects are produced by about 20 percent of the causes.
Brief summary of characteristics
Applicable to any activity or operating system
Most common uses
The following graph is an example of the final results from a Pareto analysis.
Pareto Graph of Propulsion System Problems
Limitations of Pareto Analysis
Although Pareto analysis is highly effective in identifying the most significant contributors to activity or system problems, this technique has three limitations:
1. Focuses only on the past. Pareto analysis develops risk-related characteristics for an activity or system based solely on the numbers and types of problems encountered in the past. While Pareto analysis offers a valuable look at key contributors to past problems, the exclusive reliance on historical data can be misleading in the following ways:
2. Variability in levels of risk assessment resolution. Deciding how to group elements of an activity or system for a Pareto analysis is an inherently subjective exercise. It produces significant variability in (1) the time required to perform the analysis and (2) the level of resolution in the results. Grouping elements at too high a level may mask significant variations among elements in each group. On the other hand, grouping elements at too low a level may falsely indicate relative importances of individual components.
3. Dependent on availability and applicability of data. The quality of Pareto analyses is completely dependent on the availability of relevant and reliable data for the activity or system being analyzed. A diligent focus on collecting meaningful data is critical to a successful Pareto analysis.
Source: USCG Risk-based Decision-making (RBDM) Guidelines.
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