What Is Pareto Principle? Know Understanding, Types And Benefits

Illustration of the application of the principle of pareto (Photo: Pixabay/philippfalkenhagen)

YOGYAKARTA The principle of pareto is one of the terms that are often heard in the business world. The principle of pareto is often used as a means of analysis and decision making in various contexts and increases efficiency in work. So, what is the principle of pareto? Check out the full information below.

Adapted from the DJKN page of the Ministry of Finance, the principle of pareto was first introduced in the early 20th century by an Italian economist named Vilfredo Pareto.

In 1906, Vilfredo used the principle of pareto to analyze the spread of wealth/income in Italy, where in his research it was known that 80 percent of Italy's revenue/richness is owned by 20 percent of the total population.

About 30 years later, Josep Juran, an American management engineer and consultant applied the principle of pareo when performing quality control in production.

In a study conducted by Josep, he demonstrated that 80 percent of defective products were obtained from 20 percent of the problems in production which could then be increased.

The principle of pareto is defined as a way that is used to increase efficiency in working using the 80/20 system. Therefore, this principle is also often referred to as the 80/20 principle.

The principle of pareto can provide an overview of the distribution of inequality or imbalance in various situations, where a small part of the elements or entities have a far greater impact or contribution than most other elements.

For example, often 80 percent of income comes from the largest 20 percent of customers or products. Likewise, 80 percent of the problem may be caused by 20 percent of the main causes.

Another example is that the principle of pareto can be applied by retail business owners by selling 20 percent of product variants to get 80 percent of the total sales. In order to raise sales figures, product sorting is carried out, ranging from the best-selling to the less attractive.

Summarized from various sources, Wednesday, November 29, 2023, the principle of pareto is divided into two types, including:

The principle of pareto can be applied to analyze various things based on the phenomenon that occurs. This phenomenon is connected to unexpected results, so that the source of the problem can be found.

The phenomena in question are matters relating to:

The principle of pareto can also be used to analyze things related to causes in a process, so that they can find out the root of the problem in a company.

This type of pareto principle can be applied to research things like:

The use of the principle of pareto can provide many benefits, such as:

That's information about what the principle of pareto is. Hopefully this article can add insight to the loyal readers of VOI.ID.