CPIM Practice Exam

What type of analysis is highlighted by the Pareto chart principle?

1. Time-series analysis

2. Causal analysis

3. 80-20 variation analysis

4. Comparative analysis

The correct answer is: 80-20 variation analysis

The Pareto chart principle is fundamentally associated with the concept of the 80-20 rule, which states that roughly 80% of effects come from 20% of causes. This principle emphasizes the identification of the most significant factors contributing to a problem or outcome, allowing organizations to prioritize their efforts for maximum impact. In practice, a Pareto chart visually represents data, typically in the form of bars sorted by the frequency or impact of the problems, alongside a cumulative line graph showing the overall contribution of each category. By focusing on the most critical issues, organizations can effectively allocate resources to address the primary contributors to performance gaps, inefficiencies, or defects. This concept of narrowing down problems to a vital few is the essence of variation analysis that aligns with the principles of continuous improvement and quality management. Therefore, selecting the option that captures this 80-20 variation analytical approach is inherently the most relevant.