Detecting Changes in Sales Trends: Using CUSUM Technique for

School
Georgia Institute Of Technology **We aren't endorsed by this school
Course
ISYE 6501
Subject
Marketing
Date
Apr 9, 2023
Pages
1
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Question 6.1 Describe a situation or problem from your job, everyday life, current events, etc., for which a Change Detection model would be appropriate. Applying the CUSUM technique, how would you choose the critical value and the threshold? One example of a situation where a change detection model would be appropriate is monitoring the sales of a retail store. If there is a change in the sales trend, it could indicate a shift in consumer behavior or a problem with the store's operations. To apply the CUSUM technique, we first need to choose the critical value and the threshold. The critical value is the minimum amount of change we want to detect, and the threshold is the minimum level of evidence we need to determine that a change has occurred. To choose these values, we need to consider the variability of the data and the desired level of sensitivity. For example, if the sales data is highly variable, we may need to set a higher threshold to avoid false alarms, while if we want to detect small changes, we would need a lower threshold. Once the critical value and the threshold have been chosen, the CUSUM model can be applied by tracking the cumulative sum of the deviations of the data from the mean. If the cumulative sum crosses the threshold, a change has been detected. The threshold can be adjusted based on the desired level of sensitivity and false alarm rate.
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