What do you mean by independent demand and dependent demand ? Give examples of each.

Independent demand and dependent demand are two types of demand patterns that influence inventory management and production planning:

1. Independent Demand:
   Independent demand refers to the demand for finished products or items that are not directly influenced by the demand for other products. It is typically driven by customer orders, forecasts, or market demand. Independent demand items are typically sold to end customers or users and are not used as components in the production of other items.

Examples of independent demand items include:

• Consumer electronics (e.g., smartphones, laptops)
• Clothing and apparel
• Automotive vehicles
• Household appliances
• Books and publications

In independent demand situations, demand forecasts, historical sales data, and market trends are used to estimate future demand levels. Inventory management for independent demand items involves determining optimal order quantities, safety stock levels, and reorder points to meet customer demand while minimizing stockouts and excess inventory.

1. Dependent Demand:
   Dependent demand refers to the demand for components, parts, or materials that are directly influenced by the demand for finished products or higher-level assemblies. The demand for dependent demand items is derived from the demand for the final product they are used to produce.

Examples of dependent demand items include:

• Raw materials (e.g., steel, plastic, fabric)
• Components (e.g., microchips, screws, gears)
• Subassemblies (e.g., engine blocks, circuit boards)
• Spare parts for machinery or equipment

In dependent demand situations, the demand for these items is calculated based on the bill of materials (BOM) or product structure of the finished product. Production orders for dependent demand items are generated based on the production schedule for the final product. Inventory management for dependent demand items involves coordinating production schedules, managing lead times, and ensuring the availability of components to support production operations.

Overall, understanding the distinction between independent demand and dependent demand is essential for effective inventory management and production planning, as different strategies and techniques are employed for managing each type of demand.