Pareto Distribution

What is Pareto distribution?

Vilfredo Pareto, and Italian economist in the late 1800s, who described the unequal distribution of wealth in the world. The concept was improved by Joe Juran for manufacturing operations when he said it was a methodology for separating the vital few problems from the trivial many problems. When the Pareto distribution is listed in order of money lost (or the risk for money lost) it becomes a work priority for attacking business problems that have the greatest impact on the enterprise. Winners in the organization work on the vital few important items, as they put their reputations at stake, while the losers in the organization work on the trivial many problems, which if solved, would have little impact on the enterprise.

Why use a Pareto distribution?

The Pareto distribution sets work priorities and assuming a one year pay back period describes how much money can be spent to resolve the issues. Most reliability engineers need to be working on the top 5 or 6 items all the time as data and solutions are developed slowly and the key items always need to be on the mind for active consideration. The mentality is to think like a bank robber-go for where the big money is located and get it back.

When to use a Pareto distribution?

At least quarterly reviews of the Pareto distribution are important for accountability of who has solved what problems and to define what new targets have come over the horizon that require immediate attention.

Where to use a Pareto distribution?

Pareto distributions are used throughout the organization to keep attention on the vital few issues. They are favored by management when engineers employ them based on money. Pareto distributions help set work priorities and avoid focusing on love affairs with equipment or process which often occurs to the detriment of the business. Pareto distributions explain why some work orders always get maintenance priority while other task are relegated to the category of when ever we get time to solve the problem.

These definitions are written by H. Paul Barringer

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