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O'Leary's Corollary: (to Murphy's Law) - Murphy was an optimist. (An alternative version states if everything seems to be going well, you have clearly overlooked something.)
OAG: Open Application Group.
Obligated Producer: See Packaging Waste Regulations.
Obsolete Machines (Spares For): See All Time Supply.
Obsolete Stock: see Stock (Obsolete).
Obsolescent Stock: see Stock (Obsolescent).
OC Curve: In sampling, a sample plan is obtained from a published sampling table, and specifies the size (N) of an incoming lot of material, the quality (p%) required of this incoming lot, the size (n) of the sample to be taken, and the acceptance criterion c. Now, when such a sample plan is "operated" (ie used) in material receipt, an OC curve is a function or graph illustrating the probabilities of acceptance of the incoming lot of material over a successive range of possible incoming quality levels. For example, the OC curve will show: (1) the probability of acceptance of the incoming lot if the quality is 0.5% non-conforming; (2) the probability of acceptance of the lot (with the same sample plan) if the lot has 0.6% non-conforming; (3) the probability of acceptance of the lot if the lot has 0.7% non-conforming ... and so on. It is desirable that OC curves should be "steep" - that is, that they should show big differences in probabilities of acceptance from one incoming quality level to the next. In order for an OC curve to be steep, the sample plan chosen must specify a relatively large sample. See also Operating Characteristic and see sub-section 5.3 of the free on-line purchasing 'course' at this site.
Ocean going: (US term) In transportation, shipping on the open sea (in UK English, deep sea.)
Occupational Health: the prediction and prevention of work-related ill health, and of health issues associated with work.
OED: (1) Outside exchange of dies - synonymous with external set-up time (qv); and (2) The Oxford English Dictionary, the prime reference to the vocabulary and usage of the English language (UK version), published in 13 volumes by Oxford University Press, and available in a 2 volume shorter edition (The Shorter OED).
OEE: Original Equipment Effectiveness, or Overall Equipment Effectiveness. The overall equipment effectiveness is the product of (1) equipment availability, (2) equipment performance and (3) equipment quality rate ... say (1) 80%, (2) 80% and (3) 80%, making an OEE of 0.8 x 0.8 x 0.8, = 0.512, or 51.2%.
OEM: Original Equipment Manufacturer.
OFAT (One Factor At A Time): A method of experimentation for examining the effect of a number of possible causes. Contrast Full Factorial.
Off the Shelf Satisfaction: See First Pick Ratio.
Offer (legal): A proposal by a party to supply goods or service in exchange for money. The making of an offer is the first step in forming a contract.
Officious Bystander Test: A contract between the company and a supplier is comprised of express terms (ie written down) and implied terms (obvious terms implied by commonsense, and by custom and practice). To determine later whether some particular term X is implied or not, the company might imagine what reply would have been given by both parties while the contract was being drawn up to an officious bystander (ie a nosy passer-by) if he had asked them "Is X intended to be included?". If both parties would have replied in unison "Yes - the inclusion of X is obvious! X is essential from the business point of view!", then X is indeed an implied term. Note that X must be essential at the time the contract is being drawn up; it is not an implied term simply because it later seems reasonable, or on lenghthy reflection seems a reasonable extension of the agreement.
Offset: (See also leadtime offset.) In countertrading (qv), direct offset is where the supplier agrees to incorporate materials from the country of export in the actual goods being supplied. Indirect offset is where the exporting company or exporting country places business with, or provides assistance to, the country of export, the business or assistance not being directly connected with the goods being exported.
OFT: Office of Fair Trading, a UK body which investigates alleged breaches of the Competition Act, and is empowered to take legal action as it deems fit.
Oligopoly: A market in which there are only a small number of suppliers, and no prospect of new ones, thus limiting competitive choice and, perhaps, presaging the emergence of a cartel (qv). Contrast Monopsomy.
One Piece Flow: another alias of Just-in-Time (qv).
OOP: Out of Production.
Open Order (or Scheduled Receipt): One of the three plan types in closed-loop MRP (along with the planned order and the firm plan), the open plan being a plan which has been released to the shop floor for work to start (*). Similarly, an open purchase order is a planned purchase in the MRP system which a supplier has committed to transit. When materials plans are assessed by the closed-loop MRP system with regard to their timeliness and the appropriateness of their quantities, open plans cannot be rescheduled to different dates if they are found to have due dates earlier or later than that those that are indicated by strict materials planning logic as being needed. Instead, the open plans are left with their existing dates (and quantities). However, messages are produced by the system commanding the planner, shop supervisor or buyer to reschedule the plans by direct manual intervention in the system. (*When planned or firm planned orders are "released to manufacture", usually by the planner in charge, the MRP system changes their status to that of being "open".) The open plan is also referred to as a scheduled receipt, which self obviously it is. The difference is purely semantic.
Open Plan - see Open Order.
Open Purchase Order - see Open Order.
Operating Characteristic: The probabilities of acceptance of incoming lots of parts of various quality levels, resulting from the employment of a given sample plan. The operating characteristics of a plan can be handily illustrated as a curve - see OC Curve. OC curves were at one time termed "probability of acceptance curves".
Operation Compression: In order to reduce the leadtime of a multi-operation job, the job's wait and move activities may be controlled by a coloured ticket system. For example, a red ticket may indicate the job is to be moved to the head of the queue, and given priority by shop floor materials handling staff. When the job is back on schedule, the ticket should be removed. The degree of catch-up to be expected must be estimated by a supervisor. The term is synonymous with window scheduling and, more correctly, interoperation time compression.
Operation Overlapping: In order to reduce the leadtime of a job involving the processing of many components, it may be possible to send some of the completed components ahead to the next operation before the first operation has finished, so that a start can be made on them. If the duration of the first operation is shorter than that of the second, calculation of the savings in leadtime is straightforward. If the first operation is longer than the second, however, calculation of the point at which to send the units ahead is slightly complex, since it is desirable that the arrival of the final units sent over should be synchronised with the completion of the units previously sent ahead to the second operation.
Operation Splitting: When a number of components are to be processed by a machine operation, the leadtime required to do so may be halved if 50% of the components are able to be processed by a second alternative machine. (Naturally, the operation splitting between the two machines requires that a second operator should be available, and a second set of tools.) It is noted that since there are now two works orders, each for half the original amount, planned quantities in the planning system must be corrected and an additional set of shop floor paperwork generated. It is also noted that a second set-up is required, casting doubt over the economics of splitting an operation between three machines. See also Split Batch.
Operations Research: see OR.
OPT: A manufacturing planning system originally written by Eliyahu Goldratt (see Theory of Constraints) for the resolution of planning difficulties in the presence of bottlenecked work centres. OPT first analyses master plan and material requirements in the normal way, and then, in a module called SPLIT, separates the products required by the plan into two lists, or divisions. (1) The first division comprises all those products for which the quantities required in the plan are in no way constrained or affected by the bottlenecks. These are known as "free products". Because they are unaffected by the bottlenecks, free products are scheduled and managed as they would be in a normal materials planning or MRP / CRP environment. (2) The second division comprises "bottlenecked products" - that is, products where the quantities required cannot be satisfied in full either because of direct capacity limitations of the equipment used in their manufacture or because components used in their manufacture cannot themselves be fully supplied because they (the components) are themselves bottlecked. The materials plans for the bottlenecked products, and all products directly or indirectly affected by them (ie because they are either ancestors or descendants of them), are calculated by the application of mixed integer programming, this being a variant of mathematical programming. What mathematical programming, or mathematical optimisation, does is to produce a valid solution (ie here, a material plan), but a solution taking account of the stated capacity restrictions and in which there are consequently shortfalls in output. The shortfalls are (obviously) not decided arbitrarily. Instead, they are decided on by calculation, such that some particular, chosen measure of output (which we call an objective function) from the whole plan is optimised (ie either maximised or minised). The module of OPT in which the optimisation mathematics comes into play on the bottlenecked products' plans is called "The Brain of OPT". It is usually assumed in using OPT that the objective function that will be specified by the planner will be to maximise contribution (ie total sales revenue less cost). This, of course, is the fallacy at the centre of OPT: in the event of bottlenecked output, it must be Sales & Marketing who decide what is to be made and not made, based on the company's widest commercial interests, including an assessment of competing customer claims. Unfortunately, the application of OPT frequently falls into the hands of the company's IT experts, who are blinded by the power of mathematical optimisation. The allocation of bottlenecked output cannot be made by a mathematical program based merely on maximum profit. See also Drum, Buffer, Rope for an OPT analogy. Note that the criticism of the allocation of output by mathematical means does not apply to output where Sales & Marketing - and customers - are indifferent as to the product mix, such as grades of petrol from a petroleum refinery.
Option Forecast: a term coined by John Proud in his book Master Scheduling to replace "production forecast (meaning (2))" used in two-level master scheduling.
Option Overplanning: see Over Planning.
OR: Operations Research. The application of mathematical and similar techniques to problems in manufacturing industry. Three examples of OR are the use of linear programming to optimise the allocation of output from a capacity bottleneck; the application of queuing theory to shop floor control; and the mathematical treatment of the scheduling of continuous flow production. The modern application of mathematics to practical problems is attributed to the study by Sir Henry Tizard just before WWII of the optimum tactics for the interception of German bombers. It was named operations research because of its use in analysing the effects afterwards of completed WWII operations. In the UK, there is a very well respected Operations Research Society (for the US visit www.informs.org).
Oral Agreement (legal): A legal contract between two parties that has been agreed verbally ("Oral contracts aren't worth the paper they're written on " - Samuel Goldwyn).
Orange Book, The: The name given to the book Production & Inventory Management in The Computer Age, by Oliver Wight, following its publication in 1974, on account of the colour of its dust jacket. The Orange Book included the first published exposition of Closed-Loop MRP.
Order (Customer): see Customer Order.
Order Point System (= Min/Max System): A means of replenishing stock. A new replenishment of stock is requested from the supplier (or other replenishment source) when the company's current stock level falls to its calculated order point. The order point is calculated from three factors: (1) the forecast offtake of stock, expressed in units per time period (*); (2) the replenishment leadtime of a new delivery (*); and (3) the safety stock provided to cover forecast error. The order point is then calculated as the "leadtime demand", plus safety stock ... ie the offtake demand from stock forecast to occur during the replenishment leadtime, plus safety stock. Note that if the replenishment lot size is R, the average stock level is (R/2 + S). The order point system is also called the Min / Max System because the stock level swings between a minimum (the order point) and a maximum (R + S). If this is the meaning, however, the term is clearly wrong, since the minimum stock is S - the stock level S is reached after the new replenishment has been sent for and before it arrives. (* If the forecast is D units / month and the leadtime has been recorded in days, D must be converted to a forecast of so-many units per day by dividing the monthly forecast by the number of days in the month). Use of the order point system is valid only if the fall in stock level of the product concerned is gradual and even - as it may be, for example, for fuel or common consumables. It cannot be successfully applied in a materials planning environment, since falls in stock levels are lumpy due to lot sizing. It is also very difficult to see how it could be used in a practical way if multi-period sales forecasts were to be taken account of.
Order Policy: The rule governing when a replenishment stock order is to be generated. In materials planning, the order policy will be to generate a new planned order when the projected stock balance falls to zero. While the same policy prevails in the course of master schedule management, the order policy during master schedule formulation, by contrast, is to generate a new plan requirement when the projected stock falls below the product's safety level. Under the order point system of replenishment, the order policy is to generate a replenishment order when stock falls to the order point.
Order Processing: see Sales Order Processing.
Order Quantity: When a replenishment order is generated by the materials planning system, the size of the order to cover the net requirements for the material will be determined by a planning rule applying to the particular product concerned. The order quantity is the amount specified according to the rule (for example, lots of 1000 units, lots of 1500 units, lot-for-lot (qv)).
Ordinal Number: a number denoting order or rank, such as first, second, third ... as opposed to a cardinal number (1, 2, 3 etc.).
Ordinary Shares: see shares - an ordinary share's issued, face value may merely be £1, but if the company prospers, as we know, its value will be many times higher than its face value.
Originating Site: The factory site producing Material M, as described under Multi-Site Netting - qv. See also Consuming Site.
Orthogonol: The dictionary definition of orthogonal is perpendicular, or right angled. However, in manufacturing or quality experiments, orthogonal entries in a matrix are entries said to be balanced. For example, consider three factors in an experiment, A, B and C, which can be set for experimental purposes either high (+) or low ( - ). There are eight ways of varying A, B and C in relation to each other, and the results of the eight experiments on having done so might be set out in a matrix as follows:
Run ... A....B....C ..
1 .........-....-.... - ..
2.........+....-....- ..
3.........-....+....- ..
4........ +...+ ...- ..
5..........- ...- ...+ ..
6 ........+ ...- ...+ ..
7 .........- ...+ ...+ ..
8 ........+ ...+ ...+ ..
Effect .? ....? ...? ..
The matrix is an example of an orthogonal array - ie a balanced array. For example, if we observe Column C, we see that when C is -, factors A and B contain an equal numbr of plusses and minuses, so that the effects of A and B on C cancel. Similarly, we see that when C is +, factors A and B also cancel each other. The value of orthogonality in experimental design is that it eliminates bias and correlation. There are other orthogonal schemes besides the one shown here - for example, those due to Taguchi and to Plackett-Burman.
OSA: On Shelf Availability - a common and obvious customer service goal, which must normally be qualified by such statements as "for 99% of all orders" or "non-available items supplied within 3 days" etc., (There is also the question of the consequences of non-availability.)
OS&D: Overage, shortage and damage, as they may relate to the delivery of materials from a supplier (contrast OTIF).
OTC: (1) Over The Counter, A term applied to medicine and drugs able to be bought without a doctor's prescription; (2) On-Time Commit, or on-time delivery to commit date.
OTCR: On-Time delivery performance to Customer Request date ... in effect, the same as OTIF, qv.
OTED: One Touch Exchange of Die - the goal of accomplishing a machine changeover in 100 seconds or less (see also SMED).
OTIF: Relating to the delivery of goods from a supplier - on-time, in full. The presumption must also be that the delivery is 100% conforming to quality requiremements - contrast OS&D! OTIF is but one of many possible customer service targets.
Outside In: The quality view of a system, whereby basic procedures are considered broadly from the viewpoint of the customer.
Outlier: a data point that is greater than three standard deviations from the mean (to appreciate the "mean", see variance). See also Black Swan.
Over Planning: In two-level master scheduling (see Master Scheduling and also the Final Assembly Schedule), the quantities of the various option variants which are master scheduled are determined by forecasts derived from option preferences specified by customers in the past. In a particular month, however, the variants specified in actual orders are likely to differ from the forecast split. For example, the split of option variants may be forecast to be 50:50 between the red and blue types. In a particular month, it is expected to sell 500 assemblies. Instead of selling 250 blue types, however, the company is asked for 305 blues and 195 reds. An option overplan, therefore, is a safety stock placed on an option variant to help ensure that there are high levels of option availability even though the split of actual customer orders is different from forecast. In effect, option overplanning is the providing of safety stock of option variants. The overplan amounts should be set by calculation, not by hunch and guess. A useful quick calculation is available, however, avoiding the complexity of normal safety stock mathematics, and applicable if the number of super items to be final assembled is 50 or more: Thus: Safety Stock = k SQRT (S + ui x (1 - ui)), where k = the safety factor, S = the number of super items, and ui = the super bill usage of the ith option variant.
Over Trading: A company is said to be over trading when the volume and extent of the business it has taken on is excessively large in relation to the capital it has to meet it. In these circumstances, the company may place excessive reliance on loan capital, overdrafts and supplier credit.
Overlap: In pay structures and grading, overlap is the percentage of the scale of the bottom of a higher pay grade also covered by the scale at the top of the pay grade immediately lower in the pay structure.
Overrun Device: in mechanical safety, a device used in conjunction with a guard designed to prevent access to machinery parts which are moving by their own inertia after the power has been switched off. Examples are rotation sensing devices, timing devices and certain braking systems.
Own Account: In distribution, a company's own fleet of vehicles.
