Classic #5 – Change & the Pareto Principle

The Lean Leadership Classic #5 is Change Management and the Pareto Principle:

sujet: Vilfredo Pareto source: http://homepage...

sujet: Vilfredo Pareto source: license: Pareto Catégorie:fondateur de la sociologie (Photo credit: Wikipedia)

This blog has been looking at change implementation which is a skill you need to be a successful leader in nearly any arena. We have already explored the 8 Steps of Change Management, Overcoming Resistance to Change, and the first step: Identify the Improvement Area . Since there are often more opportunities for loss reduction than there are resources in today’s Food & Beverage manufacturing plants, the Pareto Principle is a powerful tool that will help you prioritize initiatives and will support your case that there is a need for change.

The Pareto Principle is also known as the 80-20 Rule. The 80-20 Rule is credited to the early 20th Century economist Vilfredo Pareto who observed that 80% of the wealth was owned by just 20% of the people. Dr. Joseph Juran coined the term the vital few and trivial many to describe this principle. The vital few and trivial many are illustrated very well by using a Pareto Chart which is a bar chart ranking the causes by the frequency of occurence.

The good news is that this principle applies to most situations and if used properly will help you to quickly determine your priorities. Let’s take for example the losses due to minor stops (downtime event of 10 minutes or less) on your line. You can make your Pareto Chart as follows:

1. Take the downtime data that you are probably already collecting and categorize the data as it makes sense for your business.
2. Graph the data with the biggest downtime category at the left of the graph.
3. The second largest would be next to the first and so on.
Note: It is important to list the downtime categories in this order for the full impact of the 80-20 distribution as you can see by following this link: Pareto Chart

In this example, the filler and capper represent the vital few causes which become your priority areas for improvement. You will find that there are several causes of downtime for these machines. You should apply the 80-20 rule to decide which issues to address on the filler and capper as well. You may find it helpful to make a Pareto Chart for the downtime causes on the filler and capper.

Using the 80-20 rule will help you to prioritize your projects and change initiatives. It can be applied to all types of losses in your manufacturing plant including quality defects, consumer complaints, and downtime, etc. Use this powerful tool to prioritize your time and to illustrate the need for change.

About Christian Paulsen

Christian Paulsen is an Executive Consultant with 20 years of Lean Manufacturing. Chris adds value to organizations by driving process improvement and bottom line savings. Chris intends to help others by sharing the lessons learned after a quarter century of operational leadership, marriage, parenting, and even longer as a Cubs fan. Your comments on this blog are welcome. You can also connect with Chris via LinnkedIn, Twitter, and Facebook in the right sidebar. Chris welcomes your comments. Christian's professional services are available by contacting him through LinkedIn (right side bar)
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