The Origin of Pareto Principle<\/h2>\n
The Pareto Principle was discovered by Vilfredo Pareto, an Italian economist, in the late 1800s. While studying wealth distribution, he found that 80% of the land in Italy was owned by just 20% of the people. (Berger et al., 2024)<\/p>\n
Over time, people noticed the same kind of pattern everywhere, in business, productivity, manufacturing, and even in nature itself!<\/p>\n
So, simply speaking, what is the Pareto Principle?<\/h2>\n
Pareto shows that 80% of outcomes come from 20% of causes.<\/strong><\/p>\n Although this is the common ration, yet it is not permanent. It can change to 90\/10 or 70\/30, but it all says the same thing. It shows that a small fraction of inputs is responsible for the majority of results.<\/p>\n When solving business issues, you can't fix everything at once. Pareto helps identify the few vital causes that are creating most of the problem.<\/p>\n Example: In a factory, 80% of defects may come from just 2 machines out of 20.<\/p>\n In process improvement projects, Pareto helps focus on the changes that will have the biggest impact first.<\/p>\n Example: If 80% of delays in a supply chain come from 20% of suppliers, then focus on those suppliers before handling everything else.<\/p>\n Business engineers use Pareto to decide where to invest time, money, and effort.<\/p>\n Example: If 80% of revenue comes from 20% of products, then prioritize improvements for those high-performing products instead.<\/p>\n In Lean, Six Sigma, and Kaizen, Pareto is used to separate the \"trivial many\" from the \"vital few.\" This allows teams to achieve goals faster before handling smaller issues.<\/p>\n Example: A Pareto chart in quality control can quickly highlight the top defect types causing the most rework.<\/p>\n The Pareto chart (example shown in Fig. 1) is the most popular tool to apply this principle. This chart contains:<\/p>\n This visualization helps to reveal the biggest cause(s) of an issue.<\/p>\n Pareto focuses on making impactful improvements while ensuring that energy is not wasted on low-value changes.<\/p>\n Pareto helps in:<\/p>\n In conclusion, there is no need to always fix 100% of problems to see major improvements. Focus on the right 20%, and 80% of the challenge will be solved.<\/p>\n So, make sure to always do what matters most.<\/p>\nHow do Business Engineers Use the Pareto Principle?<\/h2>\n
1. Problem Prioritization<\/h3>\n
2. Process Optimization<\/h3>\n
3. Resource Allocation<\/h3>\n
4. Continuous Improvement<\/h3>\n
The Pareto Chart<\/h2>\n
![\"An](\"http:\/\/base.binus.ac.id\/business-engineering\/wp-content\/uploads\/sites\/4\/2025\/08\/pareto-chart.png\")
\n
Why is the Pareto Principle Important?<\/h2>\n
\n
References<\/h2>\n