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80/20 Pareto rule in manufacturing – A key skill for Team Leaders

Updated: Sep 13, 2023

A real life 80/20 Pareto example

Our blog "2 lean skills your Team Leaders should have: Change Points" covered one of several simple skills that make a real difference to the life and effectiveness of a Team Leader. This blog covers another, the much underrated ability to think like a dead Italian economist. Practically speaking, how to peer out onto your manufacturing empire, big or small, and separate the vital few from the trivial many using the Pareto principle (80/20 rule)

Vilfredo Pareto can't help us in person, at least not without a heater and some serious smelling salts (to quote Good Will Hunting) as he died almost a century ago. His 80/20 rule however, helpfully reaches across the generations to support Team Leaders today.

What is the 80/20 rule? (Pareto principle)

Vilfredo, who appears to have sported an early hipster beard, observed that 80% of the land in Italy was in the hands of 20% of the population. Whilst this isn't particularly interesting to us, the extension of this principle is.

How does the 80/20 Pareto rule apply in manufacturing?

If you're a Team Leader on the end of a sharp admonishment to "sort out your quality problems", the knowledge that...

...If you have 19 part numbers coming through your patch, 4 of them are likely to account for 80% of your scrap, or...

...if you have 25 machines in your patch, 5 or so of them will generate 80% of your breakdown losses... pretty useful.

80/20 a fizzy drink factory example

This simple logic takes you from wandering around in your fizzy drink canning factory hoping to get lucky and spot where to start dealing with defective cans...

to hand-drawing a pie chart and a pareto chart (see below) to work out that you need to go to the Orange line to tackle the highest number of defects:

A picture of a Pie Chart for manufacturing defects

A picture of a Pareto Chart for manufacturing defects

Then, looking harder into the Orange canning line points us to look at "Orange dented cans". Suddenly we have a problem solving focus that we know will tackle a real problem.

A picture of a Pareto Chart for manufacturing defects

If Practical Problem Solving is tricky for you, watch our video below for tips and pitfalls to avoid

Key takeaways for Team Leaders

Of course, It's not always exactly 80/20 but the 80/20 principle works pretty universally. By the way, hand drawn is almost always best as we learn by creating. We've trained too many operational leaders who had been blindly plugging numbers into excel spreadsheets of NASA level complexity, without the faintest idea what the outcome meant. No understand = no action = no kaizen.

To sustainably improve you generally need to measure where you are now, find a focus and check after whether you've made an impact or not. Data Analysis gives you this.

We even applied 80/20 thinking for Scott, an Ops Manager in an SME client, who complained he didn't have enough time to manage. We asked him to collect data for a few days on how he spent his time and, hey presto, we had some items to tackle (see below)

A picture of a Pie Chart for a manager's time lost

A picture of a Pareto Chart for a manager's time lost

A word of caution though, data is a dangerous beast. Analysing data is NOT the purpose of analysing data, improving your business is.

15 years ago we stood complaining to one of our Toyota sensei that a rubber moulding supplier we were helping had no data collection, and therefore we couldn't help them. Upon hearing this tragic news via our interpreter his face screwed up as he turned and headed to the shopfloor. Once there, he established when the scrap bin had last been emptied and proceeded to tip the rubber defects out onto the floor. In front of my eyes he created a live pareto of parts. "No data?" 

Another day, another lesson. Data is more than numbers. If you'd like our blank pie and pareto pro-formas contact us through our website here, and we'll send them over.

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