Question:

Construct a Pareto diagram for the analysis of the external failure costs for a wireless telephone manufacturer using the following data:

Type of Cost Dollars (in Thousands)

Customer complaints 20
Returned goods 30
Retrofit costs 50
Warranty claims 90
Liability costs 10
Penalties 5
Customer goodwill 25

Answer :
Step 1

The table contains an analysis of internal failures and their respective values in dollars. Pareto chart would help to identify the critical reasons for the failure.

Develop a Pareto chart for the mentioned data using given steps:

Step 1: Tabulate the given data in an “excel spreadsheet”, as shown below:

Step 2

Step 2: Select and sort the data in descending order using sort and filter option, as shown below:
After it, use “Expand the selection” and click on “Sort”. It would give the following result:

Step 3

Step 3: Determine the cumulative percentage of the frequencies, as shown below:

Enter the formulas in the excel spreadsheet as shown below:

The resultant values are as follows:

Step 4
Step 4: Now, select Column A, B and D and make a column chart “Clustered column” and then add secondary axis and change cumulative percentage series to line chart:

The Pareto chart is as follows:

Hence, Pareto chart for the mentioned data is prepared. From the chart, it can be seen that “Warranty claims” alone results in 90 percent for the internal failure. Apart from
this, “Retrofit costs” results in nearly 50% failure.

Determine the percentage of external failure costs as shown below:

Enter the data in the excel spread sheet as shown below:

The resultant values are as follows: