ITPEC IP October 2018 Question 70

Pareto chart — the chart used in ABC analysis to rank items and split them into groups A, B and C by cumulative share.

Items such as products are sorted in descending order of sales (or inventory value, or number of defects) and drawn as bars, with a line showing the cumulative percentage. Items up to about 70–80% of the total form group A, the next ones up to about 90–95% group B, and the rest group C. Group A is usually a few items bringing in most of the total, so it gets the closest management.

Answer (d)

Why not others:

• •(a) Control chart — plots a process measurement over time between control limits to detect abnormal variation
• •(b) Scatter diagram — plots pairs of values of two variables to show whether they are correlated
• •(c) Cause and effect diagram — the fishbone diagram, which organizes the possible causes of a problem by category

Key rule: ABC analysis is the Pareto principle applied to management: rank, accumulate, cut into A, B and C, and concentrate on A.

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