VITAL FEW AND TRIVIAL MANY

It is considered better to sort the causes into

two piles: the "vital few"and the "trivial many". The result of such Pareto type
analysis is that ourresources can then be directed toward the vital few, or "most
juicy," in orderto get the most return for our efforts. For example, suppose
that the incidence of defects on a particular unit ofproduct has the distribution
shown in Table 1. The defects have been listed inthe order of frequency of
occurrence and identified by letters. TABLE 1
Defect Percent of All Defects Found A
32 B 2 9 C
14 D 7 E
6 F 6 G
2 H 2 I
1 J 1 The picture is clear in
this Pareto distribution. Only three defects(A,B,C) are responsible for 7 5 percent
of all the defects that occurred. Theseappear to be the vital few. Should we
attack defects A, B and C? The answer is yes, but only if ourobjective is to reduce
the total number of defects (or the average number ofdefects per unit).
Attacking defects A, B and C may not really help us if they have a minorimpact on
the quality dollar losses. It makes sense to management to assign amonetary value
to each of these defects so that, as Juran nicely puts it, wecan retrieve some of
the "gold in the mine." rom a strategic point of view itwould be less expensive to
recover some of these losses than it would be toincrease sales sufficiently to earn
equivalent profits. Our simple Pareto distribution of one dimension (defect
frequency) takeson another dimension (annual dollar losses). The new distribution
may looklike Table 2 . Defects E and G have now moved into the limelight, while
A and B havelost their luster. Defects C, E and G account for almost 80 percent of
allquality defect dollar losses. It would seem that these are the defects against
which we should unleash our energies. TABLE 2
Defect Annual Loss Percent of Total Loss C
$300,000 34 .7 E 2 4 0,000
2 8.9 G 130,000 15.0 B
4 5,000 5.2 D 4 5,000
5.2 A 35,000 4 .0 H
2 0,000 2 .3 F 2 0,000
2 .3 J 10,000 1.2 I
10,000 1.2 Totals $86 5,000
100.0 It can be a difficult task determining the dollar values for each of the
defects; most accounting systems have not been adapted to quality costreporting.
This situation can be described as hopeless but not serious.Whatever effort is made
to get these figures, even if the accounting departmentprovides rough estimates,
can be astonishingly fruitful. For what is at stakehere is the optimum utilization
of a company's limited problem-solvingresources. At this point in our gold
digging adventure we may encounter some seriouslogistics obstacles which are not
usually considered in the customary Paretoapproach. The nature of defect C, the
most enticing carrot, is such that itwould take at least five years to remove the
defect. We may have to redesign acritical machining operation at a cost of
$150,000, to say nothing of assigningthree full-time engineers to the project. The
commitment to eliminate defectbegins to lose its glamour. It becomes increasingly
difficult to explain whythe project is faltering, and the sweet taste of $300,000
turns sour. We have inadvertently added two new dimensions to the Pareto
approach:time, and problem solving money. It appears that our original strategy has
been altered. It is not difficult to measure the expenditures needed to curethe
disease, but the dimension of time may be Pareto's Pandora's box. Tell
management that it would take five years to accomplish our objectiveand there may
be some raised eyebrows. Tell the team, committee or steeringarm that it will not
see the fruits of its labor for five years and enthusiasmmay quickly dwindle. The
personal qualities of perserverance and patience,essential to the success of our
project, may be sorely taxed. Which of the defects, then, should get our
attention? Should we tackle aproblem whose solution will yield $4 5,000 in one year
of effort, or should weattack one that will yield $300,000 in five years of effort?
Our impatience toget visible returns for our investment in a reasonable period of
time may notbe selfish or impractical at all. The cultural and political
environment inindustry being what it is, long-term projects may simply not get the
continuingdirection and sustained enthusiasm that are needed for successful
completion. There is yet another dimension or parameter that can be added to
thisintriguing approach to decision making. Our guesses as to how long it willtake
to eliminate the defect or how much real gold awaits us at the end of therainbow
are just that: guesses. We should be able to assign some probabilityof success to
our venture, knowing what we do about the nature of the lossestimate, and the
expertise of our human resources. In short, we can impose anelement of risk on our
project. Let us summarize now the several parameters we have introduced: 1.
Frequency of occurrence. 2 . Annual dollar value (of losses). 3. Time to
recover the value (in years). 4 . Investment dollars to recover the value.
5. Probability of success. The situation parallels that of a research and
development director tryingto decide which projects his limited staff and budget
should be pursuing. Thedifference between him and us in our Pareto approach is that
he consciouslyimposes the constraints of time, dollars and risk. What started
as a crisp and simple approach, the Pareto approach, nowappears to have degenerated
into a cumbersome, complicated compost ofconfusion. Not really. What we have done
is to recognize the realities ofwhat the Pareto principle truly implies in its
implementation. PARETO PRIORITY INDEX A way of making sense out of this is
to develop a Pareto Priority Indexthat effectively combines all the parameters so
that realistic decisions can
be made. One such Priority Index (P.I.) could be:

$ Value x Probability of Success P.I. =

------------------------------------ x 100 Time to Recover Value x
Investment $