How to Create a Pareto Chart in Excel?

If you have interacted with data on several occasions, you must have heard something about a Pareto chart.

Now the question is What is Pareto Chart and How to create Pareto Chart in Excel? Let’s discuss the first part ” What is a Pareto Chart?”.

What is a Pareto Chart?

Definition: Pareto Chart is a special type of chart formed after combining a bar graph and a line graph. In this chart, the bars represent discrete values presented in a decreasing manner, while the line graph displays the cumulative total of all the values.

The chart operates in a way that represents the Pareto principle which states that 80% of all the results are generated from 20% of the causes.

Given that the chart operates depending on the Pareto principle, this triggered the name Pareto chart. Alternatively, you can describe a Pareto chart as a special type of chart that uncovers consequences frequency as well as their cumulative frequency.

Business owners mainly use this chart to identify their respective limitations and raise the alarm on the areas that need to be handled with a lot of care.

Identifying the areas that need adjustments makes it easier for a business to develop in the right direction since all the essential aspects are addressed in real-time.

Components of a Pareto Chart

A Pareto chart comprises different components that work together to attain a uniform goal. Some of these components include the bars and lines, the most basic parts used to present data.

Every bar on the chart represents a specific problem, defect, or consequence within your data. On the flip side, the height of the bars represents the occurrence frequency or the cost.

Also, the bar displays the values within every category in a descending manner. The chart is arranged in a manner that begins with the tallest bars ending with the shortest bars. The line is used to display the cumulative percentage of the defects within the data.

Applications of Pareto Chart

Sometimes, you may reach a point whereby you want to analyze the data patterns that are likely to have either a negative or positive impact on the success of your organization. In such circumambulation, you need to go the extra mile and find out different charts that you can use to uncover the data details and give you a glimpse of what you can do to generate the data insights.

A Pareto chart can give you a better starting point whereby it helps you identify the major priorities of your business.

A Pareto chart is used for analyzing various business data sets and enables you to understand the issues that need to be addressed with immediate effect and propagate the success of your business. Besides, the application of this chart is not limited to the specific business industry. You can apply it to any kind of data that you intend to process and generate insights.

• Uses of Pareto Chart in Quality Control

There are many uses of the Pareto Chart in Quality Control. You can use the chart to identify quality-related issues affecting your business and give recommendations on how to mitigate the process. Also, it can help you explore and counter huge customer accounts helping you maximize the number of sales recorded.

It gives you oversight within the business, helping you understand the areas of concern that need to be prioritized over others.

• Uses of Pareto Chart in Customer Complaints

The chart can help you solve customer complaints regarding the products or services offered. The Pareto chart solves such problems by helping you evaluate and analyze all the occurrences as well as the frequency in which the problems occur.

You can use this tactic to identify and prioritize the crucial areas that need quick improvement to enhance customer satisfaction and attract more business partners.

• Uses of Pareto Chart in Identifying Business Opportunities

In addition, a Pareto chart can help you identify potential business opportunities by analyzing funding and other essential areas that the business can use to generate significant returns.

Once you have identified your potential market audience, it becomes easier to analyze all the other crucial data aspects to give you a picture of the existing gaps within the market.

Covering these gaps increases your chances of attracting more potential customers from different localities and considerably impacts your business’s success.

• Uses of Pareto Chart in Healthcare

Healthcare charts provide healthcare providers with in-depth insights into patients’ medical history for holistic and personalized care. There are many uses of the Pareto Chart in Healthcare. The healthcare sector can use Pareto to uncover the 20% factors causing 80% of problems and inefficiencies, such as promoting prevention care.

Pareto Chart in Excel

Microsoft Excel is among the best data visualization tools you can rely on when you want to visualize your data. The tool gives you multiple features that you need to use when creating different types of charts.

When you want to create a Pareto chart, you should always prioritize using Excel since it’s simple to use and generates incredible data output.

However, you need to begin by understanding all the basics before diving deep into more details. Even though Excel is the most preferred option, you need to understand that it does not have this chart in the built-in excel graphs option unless you install a third-party add-in that will help you visualize your data using a Pareto chart.

The most preferred add-in in this scenario is ChartExpo. This application is fully packed with different charts that you can use to process and analyze your data. When you want to create an advanced type of chart that you are not sure about, always prioritize the use of ChartExpo.

Where do you find ChartExpo?

Excel does not have ChartExpo as its third-party application, although you can download and install it. The app is found in the Microsoft store, where you can download and install it. After the installation, you can open it via Excel in the “Add-ins” section, where all the third-party applications are aligned. You need to sign in by entering your personal information before opening it. The tool gives you a free trial period of seven days before you subscribe to your preferred package depending on your needs.

In the coming section, we’ll take you through how to visualize data using a Pareto Chart using the ChartExpo add-in.

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How to Create a Pareto Chart in Excel?

This section will use a Pareto Chart to visualize the tabular data below.

To install ChartExpo into your Excel, click this link.

• Open the worksheet and click the Insert button to access the My Apps.

• Select ChartExpo add-in and click the Insert.

• Once ChartExpo is loaded, you will see a list of charts. Look for “Pareto Chart” in the list.

• Select the sheet holding your data and click the Create Chart from Selection button, as shown below.

• Check out the final chart below.

FAQs:

What is 80/20 rule in the Pareto chart?

80/20 rule says that 20% of the causal factors result in 80% of the overall outcomes. For instance, according to the 1992 United Nations Development Program report 80% of the world’s total wealth is held by 20% of the population.

How are Pareto charts used to improve performance?

A Pareto Chart empowers you to categorize occurrences based on their impact on a common strategic goal or objective. This visualization design aims to categorize key variables in your data based on their frequency of occurrence.

Wrap Up

Creating a Pareto chart in Excel is not as difficult a task as many people believe. You can complete the process in a few clicks, provided that you have installed ChartExpo. All you need to have is accurate data generated from different sources, and ChartExpo will help you complete all the remaining operations.

Note that a Pareto chart is a basic tool mainly used by business owners to identify the areas that need urgent addressing to enhance the well-being of their companies.