A Pareto chart is a bar graph that shows the relative importance of problems by ordering data from highest to lowest frequency:

 A Pareto chart is a bar graph that shows the relative importance of problems by ordering data from highest to lowest frequency: 

Bars

Represent the frequency or cost of each category, with the longest bars on the left and the shortest on the right 

Line graph

Shows the cumulative percentage of the factors that make up the problem, starting at 0% and ending at 100% 

80/20 cut off line

Indicates where the 80/20 rule applies, which states that 80% of the effects come from 20% of the causes 

Pareto charts are used to: 

Identify the most important contributing factors to a problem

Focus efforts on the most critical areas

Guide decision-making and problem-solving

Understand which products, customers, marketing channels, and supply chain models drive most of a business's revenue

Pareto Chart - Meaning, Analysis, Applications and Example

Pareto charts are based on the 80/20 rule, also known as the Pareto principle or the law of the vital few and trivial many. The principle was named after Italian economist Vilfredo Pareto, who observed that 80% of the land in Italy was owned by 20% of the population.