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

[hic]

All you need to do, is to make a copy of your table, change this into a Combo chart with your "Sales" expression as bars and your "Inclusive Percentage" as line. Disable the "Accumulated Sales" and make the "Exclusive Percentage" and the "Pareto Class" invisible. The conditional background color should be on the "Sales" expression.

HIC

[#4]

Hi Henric ,

      I got it.Thanks  a lot for giving with a Good Example .

[#5]

Thanks a lot Henric, it is very useful, looking for similar discussion in Future…

[thanstad]

I made this example into our production sales of films rented by ours customers and given it to the Controllers

I have approx 65000 rec i each month and it seems to me that about data concatenated for one year, will have quit have a execution time on approx. 15 sec.

Tormod Hanstad

CanalDigital

[#7]

A great example and easy to understand.

[tedalien]

Hi Henric,

thank you very much for sharing this.

I was struggling with the Inclusive Percentage Line as it was scaling together with the Dimension and the backgroung color but at the end I got it right.

Very interesting post!

Best Regards,

Alen

[thanstad]

Iam not getting the Background color to work. I tried to put it as an separate expression but its not giving the colors.

Tormod Hanstad

[#10]

Hi,

      In Expressions tab  u will get + symbol before your Expression . just click on that u will find  7 chart attributes Select Back ground color and write the Expression .

Regards,

P.Divya

[thanstad]

Thanks, very Useful 

/TH

[Anonymous]

Thanks, good job.

Regards

Davide