Supply Chain and Operations Management Glossary (O)

OEM (Original Equipment Manufacturer): A manufacturer is an OEM if its product is used a component in the product of some other manufacturer.

OLAP (OnLine Analytical Processing): A general term for database queries were some analytical calculations are performed in addition to the data retrieval. For example, computing total sales by time period, or by geographic region, or by product class might be considered a simple form of OLAP.

OLTP (On Line Transaction Processing): The processing of simple queries or lookups against a typically large database. The On-line part means there is an emphasis on short response time, such as when a customer is looking up the status of an order.

Order fill rate: the fraction of orders for which every line is filled. This measure is important, for example, if all SKU’s in the order are needed by the customer to complete the repair of a piece of machinery.

OSHA (Occupational Safety & Health Administration): An agency under the U.S. Department of Labor that sets and enforces standards for workplace safety. See http://www.osha.gov.

OTI (Ocean Transportation Intermediary):

Outbound: Shipment out of a DC. Tends to be on smaller vehicles.

The hiring by firm X of an outside firm Y to perform some activity Z that might otherwise be performed by X. Examples of such activities are shipping/transportation, computing services, payroll accounting, etc. Justifications for outsourcing are: a) there are economies of scale that can be enjoyed by Y because it serves many firms in addition to X, and b) there is little likelihood of X getting a competitive advantage by doing activity Z extremely well, c) firm X is expanding quickly and it can get the capability for doing activity Z from firm Y much more cheaply than it can develop its own capability. For example, payroll accounting requires one to be familiar with all the details of municipal, state, and federal tax withholding. A payroll accounting firm can spread the cost of maintaining this familiarity over all its clients. It would be inefficient for each client to invest in staying current on tax law. The economies of scale can also be statistical. E.g., if X’s need for the activity varies significantly over time, firm Y can handle these fluctuations more efficiently if it is providing the activity for a number of firms.

Overbooking: The process of selling more capacity than one has available, in the expectation that some of the customers to whom capacity has been committed, will cancel or not show up. Overbooking is widely used in airline and hotel reservations. No-show rates as high as 20% are not unusual, so if overbooking were not used, capacity could be significantly underused. The basic marginal analysis that is done in deciding upon the level of overbooking is that one should sell an additional unit of capacity if the expected net revenue is positive. That is, one should sell a reservation to customer X, if (immediate revenue from X) > Prob{X in fact shows up} * Prob{capacity will be oversold}* (penalty for not being able to serve the customer X).

About the Author: AJ Amjad Khanmohamed

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