A Pareto chart or pareto graph displays the importance of various factors in decreasing order in columns along with cumulative importance in a line. Pareto charts are often used in quality control to display most common reasons for failure, customer complaints or product defects.
The principle behind pareto charts is called as pareto principle or more commonly the 80-20 rule. According to wikipedia,
The Pareto principle (also known as the 80-20 rule,[1] the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.
The pareto chart is a great way to do the pareto analysis. Today, we will learn how to use excel to make a pareto chart.
See an example pareto chart of visits to this website:
(Please note that in this example, the 80/20 rule does not hold as I have chosen very small sample of data. In reality, the 80/20 principle applies to my website as well)
Making a Pareto Chart in Excel
In order to make the pareto chart in excel, first you must have the data ready. Once we have the values for each cause, we can easily calculate cumulative percentages using excel formulas. We will also require a dummy series to display the “cutoff %” in the Pareto chart.
I have arranged the data in this format. You can choose any format that works for you.
Once you have the data ready, making the pareto chart is a simple 5 step process.
1. Make a column chart using cause importance data
In our case, we select the first 2 columns in the above table and then make a new column chart.
2. Add the cumulative %s to the Pareto Chart as a line
Select the third column, press ctrl+c (copy). Now select the chart and press ctrl+v (paste). Excel will add another column series to the chart. Just select it and change the series chart type to “line chart”. Learn more about combining 2 different chart types in excel combo charts.
3. Move the cumulative %s line to secondary axis
Select the line chart, go to “format data series” (you can also press ctrl+1) and change the axis for this chart series from “primary” to “secondary”.
4. Add the cut-off % to the pareto chart
Select the fourth column in our data table, copy and paste it in the chart. This should ideally be pasted as a new line chart. If not, follow step 2 for this as well.
5. Finally, adjust formatting to make the final pareto chart
Now, our basic pareto chart is ready. We should adjust the chart formatting to make it more presentable. Once you are done, the final output will be something like above chart.
Download the Pareto Chart Template in Excel
Click here to download the excel pareto chart template.
When to use Pareto Chart?
Pareto charts can be used,
- During quality control to analyze the causes of defects and failures
- When you want to focus your resources on few important items from a large list of possibles
- To tell the story that attacking problem A might be better than solving problem C, D and F
Pareto charts and pareto analysis has great practical uses for almost anyone in a managerial role.
Have you used Pareto analysis or Pareto charts in your job?
Pareto principle is the first real management lesson I have learned during my MBA. It is the topic for my first presentation too. During the presentation, Anoop, my jovial team mate said, “80-20 principle can be tested anywhere. For eg. in most parties 80% of the beer will be consumed by 20% of people”, and the whole class started laughing.
Jokes apart, I think pareto principle is a very powerful idea told in an extremely simple way. I use the pareto analysis to find best way to invest my time. What about you? Tell me about your experiences of using pareto analysis using comments.
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8 Responses to “Pivot Tables from large data-sets – 5 examples”
Do you have links to any sites that can provide free, large, test data sets. Both large in diversity and large in total number of rows.
Good question Ron. I suggest checking out kaggle.com, data.world or create your own with randbetween(). You can also get a complex business data-set from Microsoft Power BI website. It is contoso retail data.
Hi Chandoo,
I work with large data sets all the time (80-200MB files with 100Ks of rows and 20-40 columns) and I've taken a few steps to reduce the size (20-60MB) so they can better shared and work more quickly. These steps include: creating custom calculations in the pivot instead of having additional data columns, deleting the data tab and saving as an xlsb. I've even tried indexmatch instead of vlookup--although I'm not sure that saved much. Are there any other tricks to further reduce the file size? thanks, Steve
Hi Steve,
Good tips on how to reduce the file size and / or process time. Another thing I would definitely try is to use Data Model to load the data rather than keep it in the file. You would be,
1. connect to source data file thru Power Query
2. filter away any columns / rows that are not needed
3. load the data to model
4. make pivots from it
This would reduce the file size while providing all the answers you need.
Give it a try. See this video for some help - https://www.youtube.com/watch?v=5u7bpysO3FQ
Normally when Excel processes data it utilizes all four cores on a processor. Is it true that Excel reduces to only using two cores When calculating tables? Same issue if there were two cores present, it would reduce to one in a table?
I ask because, I have personally noticed when i use tables the data is much slower than if I would have filtered it. I like tables for obvious reasons when working with datasets. Is this true.
John:
I don't know if it is true that Excel Table processing only uses 2 threads/cores, but it is entirely possible. The program has to be enabled to handle multiple parallel threads. Excel Lists/Tables were added long ago, at a time when 2 processes was a reasonable upper limit. And, it could be that there simply is no way to program table processing to use more than 2 threads at a time...
When I've got a large data set, I will set my Excel priority to High thru Task Manager to allow it to use more available processing. Never use RealTime priority or you're completely locked up until Excel finishes.
That is a good tip Jen...