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  • Writer's pictureARGO Steel Works

PARETO - The easiest way to improve your operations.

Updated: Jun 17, 2020

I don’t know if Pareto was aware of the practical impact that his theory would have on our lives, but the fact is that his 80-20 principle provided the simplest way to find improvements on our day to day activities.

The Pareto principle states that on average 80% of the effect on any event is explained by 20% of the causes, clearing our heads to focus on the main reasons and expecting the greatest improvement/effort rate.

But how does this work? It’s easy to apply, just follow this recipe.

First of all, you need an event, you can pick any random negative effect on your administrative tasks, supervising process, performance, budget administration, etc. then proceed to identify the characteristic that you want to decrease/increase (it would depend on the nature of that characteristic). After that, we need to analyze the possible origins of that event, identify what is causing it, then we have two options: We can register actual origins for the event to take place and then distribute them by recurrence; or we can estimate the contribution rate to all our possible origins. Subsequently, we just need to take a quick look to the results and propose an action plan to decrease or eliminate the main origin and voilà, just stick to the plan and expect improvement.

At ARGO we have tested this principle with extraordinary results. We once tried it at our warehouse administration process, we were looking for options to improve our PPE and consumables delivery process; that used to take the entire shift of two members of our team and almost half of the shift of one of the members of every assembling/welding working cells (we have on average 15 working cells). It was on, we had our event, time spent on this process was the characteristic that we wanted to reduce and then we proceed to identify the origin: We listed all materials requested during a 4-week period and at the end we identified recurrences, welding electrodes and wire, face shields, safety glasses, ear protection, etc. around 20 items were considered as the 20% that took the 80% of the time invested in this activity. Afterwards, we developed an action that included the fabrication and installation of standardized cabinets with 1-week capacity for each material (we considered an additional 30% capacity for peaks of consumption) and we also started a weekly delivery process to feed those cabinets.

The result. Time reduction for everyone,

Members of the working cells reduced the amount of requests and the time the process required, they also reduced the amount of time wasted visiting the warehouse from half shift to eventually 30 minutes, transferring that time to increase productivity at the assembling process.

We also reduced the amount of resources required at the warehouse to attend personnel, instead of two members full shift, it was reduced to 1 member half shift and one of those shifts is now used to replenish the cabinets (this was translated as well as time for improvement and productivity for the warehouse). As a collateral we now request once a week a replenishment to our supplier having just one requisition process and allowing the guys from procurement to focus on other things.

As you saw it was not complex nor an exhausting data gathering process, we invite you to give a chance to this simple but efficient tool, and of course, to share your experience with us.


Text By

Javier Manzano

Materials Manager

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