Inventory order crossovers

The control policies that are used in inventory management systems assume that orders arrive in the same sequence as they were ordered. Due to changes in supply chains and markets, this assumption is no longer valid. This paper aims at providing an improved understanding of the phenomenon of order crossovers and the conditions for the occurrence of order crossovers. Order crossovers are caused by differences in lead times and in the time between orders. These differences originate from several sources. This paper distinguishes three types of order crossovers according to the sources of the differences encountered. It reviews literature on these sources of differences that may cause crossovers. From a detailed analysis of the effect of contemporary changes in modern inventory management on the possibility of occurrence of the various types of order crossovers, we conclude that order crossovers should be taken into account in the inventory policies that are implemented in Enterprise Resource Planning (ERP) systems. The type of order crossovers that firms will encounter more frequently are predominantly expected order crossovers and general order crossovers. Modern ERP systems are not able to handle these types of order crossovers effectively. The types of industries that have a higher probability of facing these order crossovers are either located upstream in the supply chain, or use natural resources, or order strategic materials from multiple suppliers or from abroad. A case study of a tobacco firm that encountered order crossovers confirms these findings. The firm estimated that the potential cost savings of taking expected order crossovers into account were 30%.