ERP Glossary - O: Obsolescence to Overrun

Obsolescence

The condition or process of becoming no longer useful, either because the shelf life has expired, the product or service has been replaced by a newer version, or a time fence defined by business experience has expired. Obsolete products are often a hidden financial risk, being inventoried at full value, but having an actual worth approaching zero.

Off the Shelf

Off the shelf is very similar to "out of the box", meaning using the features and functionalities of a software system as originally written, and without customization. The closer a software package can come to fitting your business model right "off the shelf", the better.

On Time Delivery

A complete delivery which arrives where the customer desires it when it was promised. There are definition variations that are valid for a given business or industry, and the critical factor is that the variation you use be an accurate reflection of customer satisfaction with your delivery performance.

Open Order

Like a backorder, an open order is a valid external customer order which has not yet been fulfilled. The open order position for any manufacturing or distribution location is a good indicator of business strength, service performance, and scheduling needs.

Operations Management

In its broadest form, the group of leaders who are collectively responsible for a customer's "order-to-receipt" experience, including manufacturing, quality control, purchasing, supply chain, customer service, and distribution.

Opportunity Cost

Opportunity cost is the value of a purchase or choice, expressed in terms of what was not chosen. Taking an unpaid week off work to go to the beach costs not only the explicit $750 for a beach house rental; it carries another $600 in opportunity costs from choosing not to work that week.

Order Management

The process of entering, tracking, and fulfilling customer orders. Order management can vary in scope from managing thousands of orders a day from an internet site to managing a single, complex order, such as delivery of a jet airliner.

Out of the Box (Software)

Out of the box is the commonly used phrase to describe uncustomized software, particularly in ERP. Since most ERP systems do not exactly match what is currently being done, there will always be tension between when to customize ERP, and when to change the local business process to conform with the "out of the box" solution.

Outlier

In the study of statistics, and in a more general sense in a discussion of any data, an "outlier" is a data point which falls so far from the norm as to either be incorrectly measured somehow, or to have a uniquely special cause which explains its abnormality. It is important to design ERP systems around the norm, and treat outliers as what they are: rare exceptions.

Outsourcing

The decision to buy a finished, or semi-finished manufactured item from someone else, rather than produce it as a part of company operations. Outsourcing has become increasingly popular as global trade makes comparative labor rates meaningful in the total cost structure of a product. Integrating outsourced manufacturing into ERP can be difficult.

Overhead

Also known as fixed cost, or SG&A, overhead is cost associated with an organization which does not contribute directly to the production or delivery of a product or service. Manufacturing management, planning, purchasing, and legal are all examples of overhead

Overrun

In some types of manufacturing, particularly process manufacturing, it is not uncommon to introduce more raw material into the beginning of the process than would strictly be required by the math to complete the work order, due to anticipated waste, processing loss, or shrinkage, or if it is prohibitively costly to risk finishing a work order short. In these kinds of processes, there is often a small amount of finished product at the end of the run which exceeds the work order (or customer order) requirement, referred to as an overrun.

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Tom Stephenson

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Tom Stephenson