How to Use ABC Analysis and Pareto Charts for the IT Passport Exam

What is ABC Analysis?

ABC analysis is a method of classifying numerous items into three ranks—A, B, and C—based on their importance. For example, products are sorted by sales amount in descending order, then classified by cumulative composition ratio into A (~70%), B (70–90%), and C (90–100%). This analysis can be applied in a wide range of areas, including inventory management, customer management, and cost management.

Steps of ABC Analysis

The steps of ABC analysis are: first, arrange the target items in descending order of amount or quantity. Next, calculate the composition ratio and cumulative composition ratio for each item, then rank them into A, B, and C based on the cumulative composition ratio. Finally, change the management policy for each rank: focus intensive management on A and aim for labor savings on C.

What is a Pareto Chart?

A Pareto chart is a graph used to visualize ABC analysis. It displays the values for each item as a bar chart in descending order, and overlays a line graph showing the cumulative composition ratio from 0 to 100%. This chart makes it immediately clear that a small number of top items account for the majority of the total—the 80:20 rule.

The 80:20 Rule (Pareto Principle)

The 80:20 rule (Pareto principle) is an empirical rule stating that 80% of results come from 20% of causes. For example, 80% of sales come from the top 20% of customers, and 80% of quality defects arise from the top 20% of causes. This rule provides the basis for identifying areas that require priority management in ABC analysis.

Key Points Tested in the IT Passport Exam

In the IT Passport exam, you will be asked about the purpose of ABC analysis—namely, extracting priority items. The structure of a Pareto chart, specifically the combination of descending bars and a cumulative composition ratio line, is also frequently tested. Additionally, make sure to understand its position as one of the seven quality control tools. Comparing it with other tools in the seven quality control tools will deepen your understanding.

Typical Past Exam Question Patterns

• "Which method extracts priority products by arranging them in descending order of sales?" → ABC analysis
• "Which chart displays items with descending bars and a cumulative composition ratio line?" → Pareto chart

Related Terms

• Seven quality control tools (the seven quality control tools)
• Numerical management tools alongside break-even point analysis (break-even point)

Study Tips

As a study tip, remember to distinguish ABC analysis as a method for ranking importance and Pareto charts as visualization graphs. In particular, note that the bar chart is in descending order—this is a key test point. Also, memorizing one typical example each of the 80:20 rule for sales, inventory, and defects will be helpful.

Summary

By linking the steps of ABC analysis, the structure of Pareto charts, and the 80:20 rule, you can reliably score points on related questions. For comprehensive practice on the Strategy domain, check out the Strategy summary, and for full-length practice, try the mock exam.