SM2.2 80/20 Problem Solving

It is very common in business to be faced with a dilemma where you have a large number of alternative solutions to a problem. 

It is unclear which are the major contributors to the problem, or the best way to go, to help you solve the problem.

80/20 can provide a very quick analysis between conflicting alternative approaches

We are saying that the top 20% of your list of candidate issues will contribute 80% of the improvement.

So we want to quickly identify that 20% of important issues.

A quick way is to simply list the entire set of likely alternative contributors to the problem that you can think of and identify the percentage contribution that particular problem makes to the total problem.  The contribution might be measured in:

• The number of incidents in which that particular contributor occurs.
• The dollars cost of when that problem occurs.
• Other statistics like lost person days.
• The amount of inventory you hold of that product and its consequent cost and so on.

The measurement might be accurately based on accounts and other similar tools or it might be an informed guess.  As long as every thing is measured the same way, the resulting 80/20 analysis will be “fair”.

Putting these various sources into a simple spreadsheet, ranking them by the percentage of the total contribution to the problem that that individual issue contributes and ranking these cumulatively in an 80/20 table will rapidly draw your eye to the major contributors.