Disruptions

Disruptions and step changes are becoming more common in time series data. One reason for this is the abundance of available data and the growing ability to store and analyze it. Disruptions could include instances when a business hasn't been able to trade as normal. Flooding at the local pub may lead to reduced sales for a few days, for example. While analyzing daily sales across a pub chain, an analyst may have to make note of a disruptive event and its impact on the chain's revenue. Step changes are also more common now due to technological shifts, mergers and acquisitions, and business process re-engineering. When two companies announce a merger, they often try to sync their data. They might have been selling x and y quantities individually, but after the merger will expect to sell x + y + c (where c is the positive or negative effect of the merger). Over time, when someone plots sales data in this case, they will probably spot a step change in sales that happened around the time of the merger, as shown in the following screenshot:

Figure 1.2: Online travel booking chart showing characteristics of time series

In the trend graph, we can see that online travel bookings are increasing. In the step change and disruptions chart, we can see that Q1 of 2012 saw a substantive increase in bookings, where Q1 of 2014 saw a substantive dip. The increase was due to the merger of two companies that took place in Q1 of 2012. The decrease in Q1 of 2014 was attributed to prolonged snow storms in Europe and the ash cloud disruption from volcanic activity over Iceland. While online bookings kept increasing after the step change, the disruption caused by the snow storm and ash cloud only had an effect on sales in Q1 of 2014. In this case, the modeler will have to treat the merger and the disruption differently while using them in the forecast, as disruption could be disregarded as an outlier and treated accordingly. Also note that the seasonality chart shows that Q4 of each year sees almost a 20% increase in travel bookings, and this pattern continues each calendar year.

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