INDEPENDENT DEMAND VS DEPENDENT DEMAND


In inventory management, demand of inventory can be classified into two parts. They are independent and dependent demand.Independent demand is the demand of final products which are not inter-related with each other. It is generally created by outsiders like consumers, suppliers and other companies. It is unknown. In order to determine the quantities of independent demand, varieties of techniques like customer survey, trend analysis, forecasting models etc. can be used.
Dependent demand is directly related to the demand of another parts and components of products or product itself. It is relatively straight forward computational. It means, stock can be easily computed on the basis of the stock needed at upper level.

For example, if an auto mobile company plans to produce 50 cars per month, then obviously it will need 200 wheels and tires. The demand for wheels and tires is dependent demand, where as the demand of cars is independent demand which will not be a part of another and it is not related to the demand of another product or component.
Difference between Dependent & Independent demand.

Dependent
Independent
1) Related with demand of components used to produce final goods.
Example: Raw material, sub-assembly work-in-process inventory
1) Related with Demand of final goods directly.
Example: End products
2) no direct touch final customers
2) Direct touch with final customers.
3) It is straight forward computational
3) It is not straight forward computational.
4) Mathematical & Statistical models are not required to predict the demand. MRP is needed to know its value
4) Mathematical & Statistical models are used to predict the demand.
5) Low cost incurred
5) Relatively high cost incurred.

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