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What is 20 : 80 Theory ?
80/20 rule is named as Pareto principle, Matthew principle, the law of the vital few and the
principle of factory sparsity. This rule can be defined as 80% of effects come from 20% of
causes.Othervise,80% of outputs come from 20% inputs.80/20 rule can be applied in many fields such as business, management, human resources, process management, quality control, medicine and manufacturing.
Pioneer of this rule is an economist named as ‘Vilfredo Pareto’. In his garden 80% of peas was provided from 20% of pea pods. He have noticed that and applied this analysis for population and land acquisition in Italy. Then he got known 20% of the population owned 80% of the land.
This was the beginning of 80/20 rule in 1906.
In business and management this rule is applies at many events.
1.20% of companies’ products have 80% of sales
2.20% of employees are responsible for 80% of results
3.20% of marketing efforts represent 80% of the results
Using this rule, most effective resources of company can be identified. That resources are 20% of total resources of company. At any urgent situation, company owners can take a decision about 80% of other resources. It is not a huge damage for company results. That's why this is a popular rule in business and management.
In agriculture 80:20 rule is applied.
1.20% of farms produce 80% of the value
2.20% of pea pods provide 80% of peas
3.20% of plant product 80% of harvest
Then, Entrepreneurs can select what is best farms to effect the value. Farmers can identified most valuable 20% plant of the farm. Treatment for those plants should be increased for a best harvest.
In political facts, this rule may be applied.
1.80% of health care dollars are spent on 20% of the population
2. 20% of the population owned 80% of the land
3.80% of the population owned 20% of the land.
4.80% of wealth is distributed among 20% of peoples
In lot of countries rich and poor boundary may be depended on pareto principle. Above examples prove it. Distribution of population also laying on 80:20 rule. Health of peoples is behave like pareto principle.20% of peoples are most unhealthy.80% of health care dollars are spent on them.
In quality controlling pareto principle may be used
1. In 25 step manufacturing process, five of operations account for 65 present of total scrap
generation. Five of twenty is 20%.then, 20% operations account for 65% of total scrap.
2.20% of services account for 80% of the customer complaints.
3. On an order form, 20% of items generate 80% of errors.
For reducing scrap generation can be done with identifying 20% of related operation steps. By minimizing errors in those 20% steps total scrap can be controlled.
Lot of peoples complain for 20% of service. Then, in this 20% service, there may be any
problem.by identifying and rectifying those problems customer complains can be minimized. Then better service can be provide for people.
On an order form, 80% of error generated items should be identified. After checking those items, it can be verified that there are any problem in those items.by changing these items (Proper way) better order form can be filled.
Pareto charts
In further studying Pareto chart also may be used.it is a basic quality tool. It helps to identify complaints, problems, and defects. Pareto chart contains bars and a line graph. Bars are used for representing individual values and the line is used for representing cumulative values.
As a example pareto chart has shown below.
In this chart,80% of late arrivals due to traffic, child care and public transformations. Other 20% of late arrivals occurred due to all other reasons. This every events are related with 80:20 rule.
Hats why this rule is introducing as ‘universal truth’.
Pareto curves
Pareto curves are usages of 80:20 rule. Generally pareto curves are ‘J’ shaped.
As an example pareto curves can used for wealth distribution. If fraction of population is shown by x and the fraction of wealth is shown by then y is expressed as a mathematically formula.
Ln(y) = ln(A) + nln(x)
A is a constant.
Examples for pareto curves are shown below.
Basic thing we can learn by 80:20 rule, minority are responsible for majority of result. Result may be right or wrong. This is universal truth. It is related for any country, any field, anything. sometimes, there may be some changes for 80% and 20%.(as examples 78% and 20%,80% and 17%,75% and 21%)
Advantages of 80:20 rule
1. By focusing on big task first productivity of a company can be increased.
2. Wastage of a work can be minimized by identifying related steps of work.
3. Popular productions can be identified, it is a advantage for start a new business.
4. Useless resource can be cleared, useful resources can be protected.
Magic of number part 1 : Golden ratio
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