CPIM Practice Exam

What is the key characteristic of a Pareto analysis?

1. It separates the significant few from the trivial many.

2. It uses five focusing steps.

3. It is used primarily in ABC classification.

4. It assigns weighted costs associated with failure costs.

The correct answer is: It separates the significant few from the trivial many.

The key characteristic of a Pareto analysis is that it identifies and separates the significant few factors that contribute most to a problem or outcome from the trivial many. This principle is rooted in the Pareto Principle, often referred to as the 80/20 rule, which suggests that approximately 80% of effects come from 20% of the causes. In the context of supply chain management, applying Pareto analysis helps organizations prioritize their efforts on the most impactful issues, ensuring that resources are allocated efficiently towards resolving the problems that will yield the greatest benefit. Recognizing the significant contributors allows decision-makers to focus on the areas that will lead to maximum improvement in performance. While the other options relate to various tools and methodologies in quality management and supply chain practices, they do not encapsulate the essence of Pareto analysis as effectively as highlighting its role in distinguishing the critical few contributors from the less significant many.