Pareto chart: How to make one and examples in logistics

A Pareto chart is a key tool for process improvement and quality management. It provides a clear and simple way to visualize an issue’s root causes, helping teams focus their efforts on problem analysis and resolution. Based on the Pareto law, this chart helps companies concentrate their resources on the factors that most affect their operations.

In this post, we explain what a Pareto chart is, why it’s useful, and how it’s applied across industries. We’ll also show you how to make a Pareto chart and provide a practical example in logistics and warehouse management.

What is a Pareto chart?

A Pareto chart is a bar graph that displays the causes of a problem in descending order of frequency or impact. The bars are arranged from the largest to the smallest, with a line graph illustrating the cumulative percentage total. It helps teams understand at a glance which factors are most relevant.

By organizing the data this way, the chart highlights the major triggers of a problem while indicating which causes have less influence. This visual display makes it easier to allocate resources where they’ll count the most without getting bogged down by minor issues.

The chart is based on the Pareto principle, which states that roughly 80% of consequences come from 20% of causes. The Pareto chart translates this concept into a graphical representation that pinpoints and prioritizes the sources of an issue.

What is a Pareto chart used for?

Pareto charts are used to highlight problems and their causes in business contexts. Their main purpose is to uncover the reasons behind the majority of negative effects or incidents in product or service quality. A Pareto chart enables companies to:

• Spot problem patterns: Visually detect recurring factors and distinguish less critical ones.
• Focus resources on what matters: Zero in on the causes with the biggest consequences.
• Measure improvement: Update the chart after corrective actions have been implemented to verify whether critical issues have been fixed.

According to the American Society for Quality (ASQ), Pareto charts are recommended for analyzing data about recurring issues or causes in a process, targeting the most serious of multiple problems or triggers, or examining broad causes by studying their specific components.

How to make a Pareto chart

Creating a Pareto chart is a straightforward process. However, it requires well-defined steps to ensure accuracy and usefulness:

1. Identify the problem. Define the issue clearly (e.g., product defects, order errors, or process failures). A precise definition is crucial for effective analysis.
2. Collect relevant data. Record the frequency or impact of each cause or factor related to the problem over a specific period. Measure the data using consistent units (number of occurrences, costs, or duration).
3. Group and sort causes. Classify factors into unique categories and arrange them from highest to lowest occurrence/repercussions. This indicates which ones contribute the most toward the problem.
4. Calculate percentages and cumulative totals. Determine each cause’s share of the total and its cumulative value. This step applies the 80/20 rule to distinguish between primary and secondary reasons.
5. Build the chart. Create a bar graph with causes on the horizontal axis, ordered left to right by impact (major to minor). The vertical axis depicts frequency or magnitude, and a cumulative line illustrates the total percentage.
6. Analyze results. Identify the key causes that account for approximately 80% of the problem. Use this insight to prioritize corrective measures based on effectiveness.

This process, common in quality management and continuous improvement, ensures that Pareto charts accurately reflect reality and support actionable decision-making.

How to use a Pareto chart in business

The Pareto chart has wide applications across operations. Companies can leverage this tool to drive continuous improvement and optimize decision-making in multiple areas:

• Quality control: Detect the most common defects or failures, target corrective measures, reduce rejects, and increase customer satisfaction.
• Customer service: Determine the main reasons for complaints or incidents to design efficient solutions and enhance the user experience.
• Manufacturing: Highlight factors affecting efficiency or productivity (e.g., frequent stoppages or process variations) to prioritize improvements with the greatest consequences.
• Maintenance: Pinpoint the primary causes of equipment failures or efficiency losses to implement preventive or corrective actions.
• Logistics and warehousing: Track common storage, picking, or shipping errors to optimize workflows, minimize returns, and boost supply chain performance.

In all areas, Pareto analysis ensures efforts are geared toward high-impact issues, streamlining resource use and yielding measurable results.

Pareto chart example in logistics

Consider a warehouse experiencing frequent order fulfillment errors, which reduces customer satisfaction and increases operational costs.

• Data collection. Over a month, the warehouse records incidents by type: wrong items picked, incorrect labeling, incomplete orders, and incorrect quantities.
• Organization. Data are grouped and sorted from most to least frequent to highlight the top causes.
• Graphical analysis. The Pareto chart reveals that picking errors account for 50% of incidents, labeling mistakes 20%, and incomplete orders 15%.
• Decision-making. With this information, the warehouse concentrates improvement efforts on picking errors. For instance, it might implement goods-to-person solutions — such as a mini-load system, Shuttle System, or autonomous mobile robots (AMRs) — and a warehouse management system (WMS) to strengthen traceability and minimize mistakes.
• Results. Major errors drop considerably, while less frequent issues decrease gradually with complementary actions.

This approach allocates resources to the main causes, delivering immediate, measurable impact while planning incremental improvements for remaining processes.

Importance of the Pareto chart in process improvement

The Pareto chart is a practical tool for detecting and prioritizing pressing problems in any operational area. Grounded in the 80/20 rule, it channels efforts toward the factors with the greatest consequences and allows companies to assess the effectiveness of corrective actions.

Applied to logistics, manufacturing, quality, or customer service, it boosts productivity and resource efficiency. Integrating Pareto charts into business management practices is a decisive step toward continuous improvement and operational excellence.