Pareto Chart

1) The Pareto Chart, an invaluable tool in business analytics, integrates the Pareto Principle (80/20 rule) into its design, emphasizing the importance of identifying the few critical factors that significantly impact overall results. This visualization facilitates the effective prioritization of issues or items that require the most attention, enhancing decision-making processes. By focusing on key contributors that drive the majority of results, organizations can allocate resources more efficiently, ensuring significant improvements in productivity and strategic focus. For a deeper understanding of how Pareto Charts function and their applications.

2) Expected Effect:In the "Pareto Analysis of Commodity Brand Sales" section within "Pareto Analysis of Merchandise Sales," you can examine the sales figures for each brand's products alongside their cumulative sales percentages. The Pareto Chart allows for the categorization of different brands' products by cumulative sales volume, sorting them in descending order. Brands are then segmented into three groups—A, B, and C—based on cumulative sales percentages of 80%, 10%, and 10%, respectively. These segments can be visually differentiated using varying colors in a bar chart.

 For details on the dashboard, see Pareto Analysis of Merchandise Sales.  

3) Implementation Ideas: When creating analysis subjects or adding calculation indicators, existing data is processed to calculate the cumulative proportion indicator. This allows for the classification of objects into A, B, and C categories during component creation, employing an 80-20 analysis to divide objects into 80%-class and 20%-class. The analysis results are then displayed using differently colored bars. The data processing concept is illustrated in the accompanying figure.

Central to implementing the Pareto Chart division is the calculation of the cumulative proportion, which then guides the categorization of objects based on this metric. This article outlines two methods for determining cumulative proportions:

Example 1: Create a cumulative proportion in the dashboard by adding calculation indicators and applying formulas to process data.

Example 2: Calculate the cumulative proportion using data from the subject, making the indicator available for use across multiple components.

Example 1: Creating Cumulative Proportion by Adding Field in Dashboard

Creating an Analysis Subject for the Pareto Chart

(1) To create an Pareto Chart, choose My Analysis > New Subject, select Store sales statistics from the built-in public data, and click OK to add data, as shown in the following figures.

(2) Click Field Settings, deselect Store name and Area, and click Save And Update, as shown in the following figure.

Preparing Components for the Pareto Chart

Creating Components

Click Component in the bottom left corner, as shown in the figure below:

Adding Cumulative Proportion

Click  to add a calculation indicator, name it Cumulative Proportion, enter the formula ACC_SUM(SUM_AGG(Sales Volume)/TOTAL(SUM_AGG(Sales Volume),0,'sum')), click OK, as shown in the figure below:

The formula is explained in the following table:

In addition, calculating the cumulative sales first and then calculating the proportion is accepted, too. The formula is as follows: ACC_SUM(SUM_AGG(Sales Volume),0)/TOTAL(SUM_AGG(Sales Volume),0,"sum")

Configuring Components

Drag the field to be analyzed into the corresponding horizontal and vertical axes, select Custom Chart, and set Sales Volume as a bar chart and Cumulative Proportion as a line chart, as shown in the following figure:

Setting Value Axis

Set the value axis for Cumulative Proportion as shown in the following figure:

Select the Right-value Axis as Shared Axis, check Display Range > Custom, and set Maximum and Minimum as shown in the figure below:

For detailed settings, see Setting Category Axis on Charts.

Sorting

Sort Brand Description in descending order based on Sales Volume, as shown in the following figure:

Adding ABC Classification Indicator

1) Add a calculation indicator named ABC Classification with the formula IF(Cumulative Proportion<0.8,1,IF(Cumulative Proportion>0.9,3,2)), where 1 represents Class A products, 2 represents Class B products, and 3 represents Class C products,

2) Divide different classes of brands by color. Drag ABC Classification into Color under Graphic Properties>Sales Volume(Sum), and select Continuous Gradient for Gradient Type. According to the divided categories, select the number of colors. Since there are three categories, set it to 3 and set the corresponding colors as shown in the following figure:

Setting Cordon

Set the cordon for the Pareto chart as shown in the following figure:

At the same time, you can make the Pareto charts dynamic by adding filtering components and other required component types.

Effect Display

See section Expected Effect.

Example 2: Creating Cumulative Proportion by Processing Data

Taking Store sales statistics in the built-in public data as an example, perform a Pareto analysis on the sales volume of each brand and determine the most important brand for the company.

Adding Data

Selecting Field

1) Add the table Store sales statistics in the analysis subject, click Field Settings, and deselect Store name and Area, as shown in the following figure.

Group Summary

Click Group Summary, drag Brand Description into Group, and drag Sales Volume into Total, as shown in the figure below:

Sorting

Click Sort, click Add Sorting Indicator, select Sales Volume, and select Descending, as shown in the following figure:

Calculating Total Sales

1) Click Summary Column.

2) Name the new column Total Sales, set Summary Field as Sales Volume, and Summary Method as Sum, and then click OK as shown in the following figure:

Calculating Cumulative Total

1) Click Summary Column, name the new column Cumulative Total, set Summary Field as Sales Volume, Summary Method as Accumulation, Sort Field as Sales Volume and sort in descending order, and then click OK, as shown in the following figure:

2) Get the cumulative total as shown in the following figure:

Calculating Cumulative Proportion

1) Click Formula Column, name the new column Cumulative Proportion, enter the formula Cumulative Total/Total Sales and click OK, as shown in the following figure:

Note:

The cumulative total and total sales in the formula cannot be manually entered, you need to add them by clicking or dragging the field name.

2) Get the cumulative proportion as shown in the following figure:

Effect Display

Click Save And Update, enter the subject interface, and you can preview the data, as shown in the figure below:

Creating Poreto Chart Components

Refer to Preparing Components of this article for the calculation method of the chart components.

Effect Display

See Expected Effect.

Conclusion of the Pareto Chart Generation

You can conclude by creating this dashboard that 40% of the brands in this category account for 80% of the sales.

In conclusion, the use of Pareto charts in the analysis of merchandise sales effectively demonstrates how businesses can prioritize resources and efforts based on the principle that a small percentage of items typically contributes the majority of results. By calculating and visualizing cumulative proportions, organizations can segment products into A, B, and C categories, leading to more informed decision-making processes. This method underscores the utility of the Pareto principle in strategic business applications, optimizing both inventory management and sales focus.