A Pareto Analysis uses the Pareto Principle that assumes that the large majority of outcomes or effects (Typically 80%) are driven by a few important causes (Typically 20%). The Pareto Principle is also known as the Pareto Law, Law of Vital Few or 80/20 Rule. For more details about the 80/20 rule theory, 80/20 examples, Excel Tutorials and Templates, please visit our website: [ Ссылка ]
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VIDEO CONTENT
In this video, a Pareto Analysis is automated with a Pareto Analysis Excel Add-In. The Pareto Analysis is done in a Sale Analysis context to highlight the products that generate most of the sales among a list of 1000 products. To do a Pareto Analysis in Excel manually, you can simply follow our online tutorial here:
HOW TO DO A PARETO ANALYSIS IN EXCEL IN 5 SIMPLE STEPS
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AUTOMATE YOUR PARETO ANALYSIS WITH AN EXCEL ADD-IN
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MORE PRODUCTIVITY RESOURCES ON THE BLOG
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VIDEO TRANSCRIPT
Time and money are limited resources which can be quickly optimized with a Pareto Analysis.
A Pareto Analysis allows you to focus on what really matters hence saving time and money.
As an example, it is an axiom of business management that "80% of sales come from 20% of clients".
So let's illustrate this with a simplified example using the Pareto Analysis Add-In for Microsoft Excel.
On this spreadsheet, we have 1000 product references and their corresponding total sales.
If we want to focus our commercial efforts on the products that drive the most of our sales, a Pareto Analysis is ideal.
Here we have 1000 products that generated over 2 million dollars in sales.
What are the products that make the most part of this amount, let's say 80% of this amount?
To find out, simply put the cursor in the sales column and run the Pareto Analysis via the shortcut or the ribbon.
The add-in provides first an overview of
- the range of cells in the sales column that were processed. It is called the "relevant range"
- basic statistics about the data contained in the "relevant range" such as the average and median total sale per product.
- and finally, the distribution analysis that stipulates that only 200 products make 80% of the total sales. Actually, 80% is the default target value, but it can be changed in the settings.
The most important products have their total sales highlighted in green. Green is the colour by default, but it can be changed in the settings.
By selecting "Continue" and then "Format 2"; it filters out the least important product to focus on the most important ones whose sales are highlighted in green.
As a result, we have here in green the most important products as they represent only 20% of all the products, but they make 80% of the total sales.
We can now focus our commercial efforts on these products.
Yes, I could do all of this manually each time I want to make a Pareto Analysis on a dataset... but time is money, isn't it?
