It is a very helpful tool to identify the greatest opportunity for improvement among various possibilities and to identify the small number of most influential causes among the complete set of possible sources of error. A Pareto chart is a bar graph with data in descending order from left to right. The first step is to create a bar graph with defects or error data arranged in descending order. The y-axis of the chart accounts for the number of defects.
The next step is to add a cumulative percentage scale on the right-hand side of the chart. This second scale along the vertical y-axis mirrors the scale along the left hand side. A line graph that extends over the top of the bar data is the cumulative percentage curve. Plotting of the curve is done as a series of connected points that are obtained by assign the values from left to right and dividing by the total.
In the Pareto charts the left most bar indicates the greatest opportunity for improvement as it represents the source of error responsible for most defects. Pareto charts also helps to identify those few sources of errors that account for most of the defects or errors.
Figure : Pareto chart