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Exponential CUSUM charts are used in monitoring the occurrence rate of rare events because the interarrival times of events for homogeneous Poisson processes are independent and identically distributed exponential random variables. In these applications, it is assumed that the exponential parameter, i.e. the mean, is known or has been accurately estimated. However, in practice, the in‐control mean is typically unknown and must be estimated to construct the limits for the exponential CUSUM chart. In this article, we investigate the effect of parameter estimation on the run length properties of one‐sided lower exponential CUSUM charts. In addition, analyzing conditional performance measures shows that the effect of estimation error can be significant, affecting both the in‐control average run length and the quick detection of process deterioration. We also provide recommendations regarding phase I sample sizes. This sample size must be quite large for the in‐control chart performance to be close to that for the known parameter case. Finally, we provide an industrial example to highlight the practical implications of estimation error, and to offer advice to practitioners when constructing/analyzing a phase I sample. Copyright © 2013 John Wiley & Sons, Ltd.

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The geometric control chart has been shown to be more effective than p and np‐charts for monitoring the proportion of nonconforming items, especially for high‐quality Bernoulli processes. When implementing a geometric control chart, the in‐control proportion nonconforming is typically unknown and must be estimated. In this article, we used the standard deviation of the average run length (SDARL) and the standard deviation of the average number of inspected items to signal, SDARL*, to show that much larger phase I sample sizes are needed in practice than implied by previous research. The SDARL (or SDARL*) was used because practitioners would estimate the control limits based on different phase I samples. Thus, there would be practitioner‐to‐practitioner variability in the in‐control ARL (or ARL*). In addition, we recommend a Bayes estimator for the in‐control proportion nonconforming to take advantage of practitioners' knowledge and to avoid estimation problems when no nonconforming items are observed in the phase I sample. If the in‐control proportion nonconforming is low, then the required phase I sample size may be prohibitively large. In this case, we recommend an approach to identify a more informative continuous variable to monitor. Copyright © 2012 John Wiley & Sons, Ltd.