Recipe for a Pareto Analysis

[hic]

“Which products contribute to the first 80% of our turnover?”

[hic]

This type of question is common in all types of business intelligence. I say “type of question” since it appears in many different forms: Sometimes it concerns products, but it can just as well concern customers, suppliers or sales people. It can really be any dimension. Further, here the question was about turnover, but it can just as well be number of support cases, or number of defect deliveries, etc. It can in principle be any additive measure.

It is called Pareto analysis. Sometimes also known as 80/20 analysis or ABC analysis.

The logic is that you first sort the products according to size, then accumulate the numbers, and finally calculate the accumulated measure as a percentage of the total. The products contributing to the first 80% are your best products; your “A” products. The next 10% are your “B” products, and the last 10% are your “C” products.

And here’s how you do it in QlikView:

1. Create a pivot table and choose your dimension and your basic measure. In my example, I use Product and Sum(Sales).
   
   
2. Sort the chart descending by using the measure Sum(Sales) as sort expression. It is not enough just to check “Sort by Y-value”.
   
   
3. Add a second expression to calculate the accumulated sales value:
        RangeSum(Above(Sum(Sales), 0, RowNo()))
   Call this expression Accumulated Sales. The Above() function will return an array of values – all above values in the chart – and the RangeSum() function will sum these numbers.
   
   
4. Create a third expression from the previous one; one that calculates the accumulated sales in percent:
        RangeSum(Above(Sum(Sales), 0, RowNo())) / Sum(total Sales)
   Format it as a percentage and call it Inclusive Percentage.
   
   
5. Create a fourth expression from the previous one; one that calculates the accumulated sales in percent, but this time excluding the current row:
         RangeSum(Above(Sum(Sales), 1, RowNo())) / Sum(total Sales)
   Format it as a percentage and call it Exclusive Percentage.
   
   
6. Create a fifth expression for the ABC classification:
         If([Exclusive Percentage] <= 0.8, 'A', If([Exclusive Percentage] <= 0.9, 'B', 'C'))
   Call this expression Pareto Class. The reason why the Exclusive Percentage is used, is that the classification should be determined by the lower bound of a product’s segment, not the upper.
   
   
7. Create a conditional background color, e.g.
         If([Pareto Class] = 'C', LightRed(), If([Pareto Class] = 'B', Yellow()))

You should now have a table similar to the following. In it you can clearly see the classification of different products.

In this table, there are five different expressions that you can use for Pareto analysis. The graph in the beginning of this post uses Sales and Inclusive Percentage for the bars and the line, respectively; and Pareto Class for the coloring of the bars.

Further, you may want to combine the Pareto Class and the Exclusive Percentage into one expression:

     Pareto Class =
         If(RangeSum(Above(Sum(Sales),1,RowNo())) / Sum(total Sales) <= 0.8, 'A',
         If(RangeSum(Above(Sum(Sales),1,RowNo())) / Sum(total Sales) <= 0.9, 'B', 'C'))

Good luck in creating your Pareto chart.

HIC

Further reading related to this topic:

Recipe for an ABC Analysis

Recipe for a Pareto Analysis – Revisited

[tedalien]

Hi Henric,

Happy New Year.

I have one easy question. How you get the 80% threshold line you have in the graph as dotted line?
I have a green continuous line but I seem not finding any dotted style set up.

Could you point me out to the right direction?

Many Thanks,

Alen

[hic]

Chart Properties -> Presentation -> Reference Lines

HIC

[tedalien]

Thank you Henric,

the reference was not working on the secondary Y and I had worked around with an expression which cannot be as dotted line. With your input I now I fixed the reference on secondary Y and it works.

Thank you!

Alen

[#6]

Hi Henric,

Thank you very much for your article.

Very-very-very useful for me!

And small question: how to make invisible into pivot table intermediate expressions ("Accumulated Sales", "Inclusive Percentage", ...)? Ie I want to remain visible only two fields: "Product Name" and "Pareto class".

Thanks in advance,

Oleg

[hic]

The Pivot Table doesn't have the concept of enabled, invisible expressions. An expression is either enabled and visible, or disabled and invisible. So you need to disable the expressions you don't want.

The Pareto Class depends on the Exclusive Percentage only. All other expressions can be disabled or deleted. If you want to disable the Exclusive Percentage also, you can do that too, but then you need to re-write the Pareto Class like I have done in the end of the article.

Good Luck!

HIC

[#8]

Thank you, Henric!

Now I understand about the visibility expressions.

And the last question: Do you plan to publish in the near future about the XYZ-analysis?

Regards,

Oleg

[hic]

I hadn't planned to do so, but I can look into it. It could be a good topic for a post.

HIC

[#10]

I'm sure - it will be wonderful and useful for many to see the implementation of the XYZ-analysis performed by such a specialist like you. Especially interesting combination of these types of analyzes (ABC and XYZ). Personally, I'll wait impatiently this publication.

Regards,

Oleg

[rameen]

Great example Henric !

I want to combine this with FMS Analysis based on Sale Qty such that each product simultaneously gets assigned two classes -- A/B/C and F/M/S and then count the no of items in each combination, eg how many products belong to AF, AM, AS, BF, BM etc. based on sale period selected. How could i do that?

Thanks and Regards

Rameen

[vikasmahajan]

Can you share demo please