Question

What is the Pareto 80-20 rule? How it used to rank quality problems? Why is it used?

Answer 1

Pareto principle state that the 80% of effects come from the 20% of the causes.

Some time organizations knows that most of their profit is not coming from all the customers that they have. Rather 80% of the profit is coming from the 20% of the customers that they have. Therfore organization give priority or preference to those 20% customers who can really make 80 % of the profit in the organization. This rule will help the organizations to maximize their value through less inputs. Thus companies can reduce the uncertainties and quality issues involved in the buisness operations.  

Similarly pareto 80-20 rule used to predict the quality issues in the production organization. Let say most of the defects is coming from one perticular machines which have operation of 20% of overall operation, it may leads to reduce the 80% of profit to the business. Hence the organization should focus more at the machines where it has more defects. Based on this criteria organization can use the 80-20 rule to rank the quality problems.

The main intension of using the 80-20 rule is to identify the defects, errors in the business operations in order to maximize the profits, productivity, reduce the cost in the business operations.

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