Incorporating Order Crossover Information into Service-Oriented Base Stock Policy Decisions

We investigate the impact of order crossover on a periodic, order-up-to (R, S) inventory system where attaining a target service level is the focus. Order crossover, when orders arrive in a sequence different from that in which they were originally placed, is increasingly likely to occur in modern supply chains. One reason for this is the increasing pressure to focus on service performance, which we refer to as the “Amazon Service Effect”. Many service-oriented changes to order placement and fulfillment strategies will increase the chance of order crossover. While the majority of inventory control studies, including crossover-focused studies, tend to be cost-oriented, in practice many inventory systems are driven by service goals. To explore the use of crossover information in inventory policy decision-making we adopt the “effective lead-time”(ELT) approach (Hayya et al., 2008) to representing order lead-times where order crossover is present. We develop a hybrid discrete-event/contin