Optimal and approximate policies for inventory systems with order crossover

Mahesh Srinivasan, Robert Alexander Novack, Douglas J. Thomas

Research output: Contribution to journalReview article

16 Citations (Scopus)

Abstract

Acommon assumption in inventory analysis is that replenishment orders arrive in the same sequence in which they were placed. In practice, however, a variety of factors may cause orders to arrive out of sequence, a phenomenon known as order crossover. This article analyzes a periodic-review inventory system for a single item with discrete variable demand and discrete variable and long leadtimes (relative to the review period). Under such a scenario, multiple orders are simultaneously outstanding, and orders may arrive in a different sequence than placed. If such order crossover occurs, traditional inventory analysis overstates expected shortages and standard inventory control policies are no longer optimal. This article discusses why orders may cross over in practice and investigates the implications of order crossover to inventory management policies. We investigate the cost performance of optimal policies under order crossover and also suggest approximate policies which are easier to compute and implement. Both the optimal and approximate policies take advantage of detailed real-time information about the status of pending orders and goods in transit, and hence in a majority of cases perform better than commonly used policies which do not incorporate such information.

Original languageEnglish (US)
Pages (from-to)180-193
Number of pages14
JournalJournal of Business Logistics
Volume32
Issue number2
DOIs
StatePublished - Jun 1 2011

Fingerprint

Inventory systems
Crossover
Inventory management
Inventory control
Scenarios
Costs
Lead time
Periodic review
Factors
Shortage
Optimal policy
Replenishment

All Science Journal Classification (ASJC) codes

  • Business, Management and Accounting (miscellaneous)
  • Management Science and Operations Research

Cite this

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Optimal and approximate policies for inventory systems with order crossover. / Srinivasan, Mahesh; Novack, Robert Alexander; Thomas, Douglas J.

In: Journal of Business Logistics, Vol. 32, No. 2, 01.06.2011, p. 180-193.

Research output: Contribution to journalReview article

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AU - Novack, Robert Alexander

AU - Thomas, Douglas J.

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AB - Acommon assumption in inventory analysis is that replenishment orders arrive in the same sequence in which they were placed. In practice, however, a variety of factors may cause orders to arrive out of sequence, a phenomenon known as order crossover. This article analyzes a periodic-review inventory system for a single item with discrete variable demand and discrete variable and long leadtimes (relative to the review period). Under such a scenario, multiple orders are simultaneously outstanding, and orders may arrive in a different sequence than placed. If such order crossover occurs, traditional inventory analysis overstates expected shortages and standard inventory control policies are no longer optimal. This article discusses why orders may cross over in practice and investigates the implications of order crossover to inventory management policies. We investigate the cost performance of optimal policies under order crossover and also suggest approximate policies which are easier to compute and implement. Both the optimal and approximate policies take advantage of detailed real-time information about the status of pending orders and goods in transit, and hence in a majority of cases perform better than commonly used policies which do not incorporate such information.

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