Sequential Analysis, 26: 117122, 2007 Copyright Taylor & Francis Group, LLC ISSN: 0747-4946 print/1532-4176 online

e DOI: 10.1080/07474940701246943

Guest Editorial: Eighty Years of Control Charts

Wolfgang Schmid
Department of Statistics, European University Viadrina, Frankfurt (Oder), Germany

Abstract: Juran (1997) described in his memories the beginning of statistical process control. We can nd the remarkable sentence Shewhart invented the control chart on May 16, 1924. Eighty years passed, and in the meantime control charts have become one of the main important tools in statistics. The idea behind the special issues of Sequential Analysis is two-sided. On the one side, we want to honor the pioneering work of Walter Shewhart. On the other side, several important new developments in this area are described from both the theoretical and practical point of view. Keywords: Control charts; Statistical process control. Subject Classications: 62L10; 62B99; 62P20.

1. WALTER A. SHEWHART Walter Shewhart was born on March 18, 1891, in New Canton, Illinois, USA. He attended the University of Illinois before being awarded his Ph.D. in physics from the University of CaliforniaBerkeley in 1917. Following a brief spell as an academic, in 1918 he changed to the Western Electric Company, a manufacturer of telephone hardware for the Bell Telephone Company. Seven years later he was transferred to the Bell Telephone Laboratories, where he worked until his retirement in 1956. Shewhart died in Troy Hills, New Jersey, USA, on March 11, 1967. At the beginning of the 1920s the management of the Engineering Department at Western Electric had the idea to improve the reliability of their transmission systems. Because ampliers and other equipment had to be buried underground, there was a business need to reduce the frequency of failures and repairs. Bell Telephone had already found the importance of reducing variation in a manufacturing process. Moreover, they realized that continual process adjustment
Received March 29, 2005, Revised July 10, 2006, Accepted November 2, 2006 Recommended by N. Mukhopadhyay Address correspondence to Wolfgang Schmid, Department of Statistics, European University Viadrina, Grosse Scharrnstr. 59, Frankfurt (Oder), 15230, Germany; Fax: 49-335-5534-2233; E-mail: schmid@euv-frankfurt-o.de

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in reaction to nonconformance actually increased variation and degraded quality. Their aim was to dene scientically a method for ensuring quality assurance. An entire team started to work on that area. Other members of the team were H. F. Dodge, G. D. Edwards, and H. G. Romig. In 1924, Shewhart developed the concept of a control chart as a tool for distinguishing between assignable-cause and chance-cause variation. Shewhart stressed that bringing a production process into a state of statistical control, where there is only chance-cause variation, and keeping it in control, is necessary to predict future output and to manage a process economically. This pioneering contribution is often considered as the formal beginning of statistical process control (SPC). His rst chart was a chart for the percent defective. He soon extended the concept to monitor the mean and the standard deviation as well. He summarized these ideas in his rst book, in 1931. From the late 1930s onward, Shewharts interests expanded out from industrial quality to wider concerns in science and statistics. During his lifetime, Shewhart received many distinctions. He was founding member, fellow, and president of the Institute of Mathematical Statistics. In 1945 he was elected to the presidency of the American Statistical Association. He was a founding member of the American Society for Quality Control in 1947. Later he became the rst honorary member and rst Shewhart medalist of the society. Shewhart was a fellow of the International Statistical Institute. The Royal Statistical Society elected him to an honorary fellowship in 1954.

2. THE PERIOD AFTER SHEWHART Shewhart control charts have gained widespread applications in industry. They are among the most important and widely used devices in statistics (Stoumbos et al., 2000). One of the reasons for their great popularity among practitioners lies in their simplicity. The work of Shewhart has been the starting point of many new fruitful developments. Because Shewhart charts make exclusively use of the present sample, they are not effective for small and moderate changes. In such cases, control schemes with memory like, e.g., the cumulative sum (CUSUM) chart of Page (1954) and the exponentially weighted moving average (EWMA) scheme of Roberts (1959) provide better results. In order to assess a control chart, various measures of its performance have been introduced (e.g., Frisn, 2003). In practice the most often applied criterion is the average run length (ARL). Based on this quantity, a detailed comparison of the EWMA and CUSUM charts for independent samples was given by Lucas and Saccucci (1990). The authors gave recommendations about the choice of the smoothing parameter of an EWMA chart. Because for the ARL it is assumed that in the out-of-control state the rst observation is already inuenced by the change, many researchers prefer more general measures like, e.g., quantities based on the average delay. Srivastava and Wu (1993) used the maximum average delay in order to compare the EWMA, CUSUM, and ShiryayevRoberts procedure. They showed that asymptotically, the EWMA procedure is less efcient than the CUSUM and Shiryayev-Roberts method. Of course, it is desirable to have statements on optimal control schemes. Contrary to testing theory, it has turned out that there is no globally optimal control

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scheme. There are several papers dealing with the asymptotic optimality of certain procedures (e.g., Lai, 1995, 2004; Lorden, 1971; Moustakides, 1986). Reynolds et al. (1988) presented another approach on how the behavior of the traditional Shewhart chart can be improved. They propose to vary the sampling rate adaptively as a function of the data coming from the process in order to reduce the detection delay of process changes. The idea of variable sampling intervals (VSIs) has been extended to other control schemes. The statistical properties of VSI charts have been extensively investigated. Another approach to varying the sample rate is to choose the sample size depending on the data (Rendtel, 1990). Due to the rapid increase of computer power, it is nowadays possible to monitor a complex multivariate data set online. Recently control charts for multivariate observations have become more and more important. An extension of the EWMA chart to the multivariate case was given by Lowry et al. (1992). The generalization of the CUSUM scheme is not so obvious, because it is desirable to have a chart that does not depend on the direction of the change. Several proposals have been made in this direction (e.g., Ngai and Zhang, 2001; Pignatello and Runger, 1990). Up to the end of the 1980s, one of the basic assumptions of nearly all papers on SPC was that the underlying observations are independent over time. Alwan (1989) showed that in many cases a neglected correlation is responsible for a signal. Alwan and Roberts (1988) proposed to apply the standard control charts to the residuals of the time series process. In several papers direct extensions of the classical charts have been derived by taking the correlation structure into account (e.g., Nikiforov, 1975; Schmid, 1995, 1997). A survey about the state of the art is given by Knoth and Schmid (2004). Besides assessing these strong effects of correlation on the control charts as quality control tools in industrial statistics, one has to consider correlation as a typical pattern of data that we can nd, e.g., in medicine, environmental sciences, and nance. In such cases the underlying data set frequently has a more complicated structure. For that reason it is necessary to introduce new types of control procedures. Recently several papers have been published showing the importance of SPC in areas other than engineering (e.g., Bock, 2004; Lawson and Kleinman, 2005; Schmid and Tzotchev, 2004). The fact that control charts can be successfully applied in other elds of science shows that they are an extremely important tool of wide use.

3. CONTENT OF THE SPECIAL ISSUES The papers from the two special issues give an overview about several important new developments on SPC. Marianne Frisn discusses in her contribution several optimality criteria for control charts. Evaluations and optimality criteria are important in order to choose which surveillance method to use for a specic purpose. The relationship between the Shewhart chart and the followers is examined. A uniform presentation of the methods, by expressions of likelihood ratios, facilitates the comparisons between the procedures. Moreover, it is described how these charts can be extended to more complicated situations like, e.g., gradual changes, changes between unknown parameters, multivariate surveillance, and dependent structures. Several examples

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are presented showing the need for surveillance in new areas like public health, economics, and computer science. For determining the design of a control chart, it is usually assumed that the distribution and the parameters of the in-control process are known. In practice, however, the parameters have to be estimated and a suitable distribution must be chosen. Albers and Kallenberg analyze the inuence of the estimation step on the behavior of a one-sided upper Shewhart chart assuming that an independent random sample is present. Because the control limits depend on the mean values, a limit theorem is used to approximate the moments. If the variables are not normally distributed, it is proposed to use the normal power family. Furthermore, a nonparametric chart is considered along with a combined chart taking into account the advantages of other approaches. In the paper of Champ and Jones-Farmer, the problem of unknown parameters of the underlying target process is treated as well. It is assumed that an independent random sample from a multivariate normal distribution is given. The authors study the inuence of parameter estimation on control charts for the mean vector. It is shown that the distributions of the run lengths of several control charts for estimated parameters only depend on a noncentrality parameter. In a simulation study, the charts with known and estimated parameters are compared with each other. Moreover, the charts with estimated parameters and modied critical values are analyzed depending on the dimension of the process. Golosnoy and Schmid describe how control charts can be applied to monitor portfolio weights. It is assumed that a risk-averse investor chooses the weights such that the portfolio variance attains its smallest value. Four types of control charts are introduced. They are based on the sample global minimum variance portfolio (GMVP) weights or the differences between two successive sample GMVP weights. The control statistics are obtained by multivariate exponential smoothing and by using the Mahalanobis distance. For the calculation of the control designs, asymptotic considerations are used. It is shown that the sample weights behave asymptotically like a unit root process. This fact motivates to introduce control charts based on the rst differences. The proposed methodology is applied to empirical data. In the next issue, Morais and Pacheco consider Shewhart schemes with VSIs. Some analytical results for these control charts are derived. The paper discusses several properties of the time to signal of Shewhart schemes with VSIs that have a discrete geometric compound distribution. The impact of VSIs in the performance of a Shewhart chart is studied. These results provide a more effective comparison of Shewhart schemes with xed and variable sampling intervals than the comparisons based on numerical results. In the contribution of Reynolds and Kim, a type of variable sampling rate control chart based on sequential sampling is investigated in which the sample size is a function of the data. The aim is to monitor the mean vector and to detect increases in the variances of a multivariate normal process assuming independent random vectors. Several multivariate EWMA charts based on the sample means and on the sum of the squared deviations from the target are considered. It is shown that if sequential sampling is used, the average performance is much better than for the multivariate control charts with xed sample size. Knoth deals with simultaneous EWMA charts for the mean and the variance of an independent normal sample. In the paper several procedures for the calculation

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of the ARL are compared with each other. All algorithms are based on numerical methods. The aim of the contribution is to get a procedure with high accuracy. It is shown that the most accurate results are obtained for the collocation approach. Moreover, the speed of the algorithms is compared with each other. Han and Tsung introduce CUSUM multicharts that allow the efcient detection of abrupt changes in the mean of a process by considering a set of different changes simultaneously. The authors argue that CUSUM multicharts possess a better detection performance and a higher capability than individual CUSUM charts. An approximation to the out-of-control ARL is derived assuming that the specied value of the in-control ARL is converging to innity. Based on this result, the out-of-control ARLs of the CUSUM multichart and of separate CUSUM charts are compared with each other. The authors use a simulation study to show that CUSUM multicharts outperform the EWMA, CUSUM, and EWMA multichart.

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Reynolds, M. R., Jr., Amin, R. W., Arnold, J. C., and Nachlas, J. A. (1988). X Charts with Variable Sampling Intervals, Technometrics 30: 181192. Roberts, S. W. (1959). Control Charts Based on Geometric Moving Averages, Technometrics 1: 239250. Schmid, W. (1995). On the Run Length of a Shewhart Chart for Correlated Data, Statistical Papers 36: 111130. Schmid, W. (1997). On EWMA Charts for Time Series, in Frontiers of Statistical Quality Control, Lenz, H-J. and Wilrich, P.-Th, eds., pp. 115137, Heidelberg: Physica. Schmid, W. and Tzotchev, D. (2004). Statistical Surveillance of the Parameters of a One-factor CoxIngersollRoss Model, Sequential Analysis 23: 379412. Shewhart, W. A. (1931). Economic Control of Manufactured Product, New York: Van Nostrand. Srivastava, M. S. and Wu, Y. (1993). Comparison of EWMA, CUSUM, and ShiryayevRoberts Procedures for Detecting a Shift in the Mean, Annals of Statistics 21: 645670. Stoumbos, Z. G., Reynolds, M. R., Jr., Ryan, T. P., and Woodall, W. H. (2000). The State of Statistical Process Control as We Proceed into the 21st Century, Journal of American Statistical Association 95: 992998.