Independent demand

Independent demand
See also
Dependent demand Reorder level Cost element Cost model Order point Inventory record Logistics Business process mapping Finished goods inventory

Independent demand is demand for an item which is unrelated to the demand for other items.

“Another way to understand inventory is to separate it into two broad categories: dependent and independent demand. Understanding this difference is important as the entire inventory policy for an item is based on this. Independent demand is demand for a finished product, such as a computer, a bicycle, or a pizza. Dependent demand, on the other hand, is demand for component parts or subassemblies. For example, this would be the microchips in the computer, the wheels on the bicycle, or the cheese on the pizza.”

“The relationship between independent and dependent demand is depicted in a bill of materials (BOM), a type of visual diagram that shows the relationship between quantities. Dependent demand order quantities are computed using a system called material requirements planning (MRP), which considers not only the quantities of each of the component parts needed, but also the lead times needed to produce and receive the items.”

Bill of materials

In IT systems supporting production management and warehouse management, the BOM structure of products is the starting point and the basis of MRP (Material Requirements Planning), MES (Manufacturing Execution System) and APS (Advanced Planning System) mechanisms.

Basic IT systems based on databases allow for the creation of BOM structures for products and use them for the above-described purpose, i.e. for generating orders to suppliers based on orders from recipients. More advanced systems have BOM structures extended by sets of operations required to produce a given intermediate along with the time needed to carry them out. Fortunately, they have the ability to run basic MRP mechanisms allowing to generate material demand along with approximate maturity dates of a given raw material. In APS-class systems, we have the possibility to apply advanced relationships between individual operations, semi-finished products, components and raw materials to BOM structures, and thanks to the use of advanced production planning and resource optimization mechanisms, we have the opportunity to generate a very detailed demand for raw materials for production, including detailed dates and times maturity. APS class systems also allow generation of very detailed production plans taking into account the availability of individual resources required for production (operators, machines and tools).

“First research question is “How to deal with the diversification of the products”. The second research question is “How to developed one product structure that has capability to cover unlimited product variant”. The approach to solve those two research questions is carried out by developing a model of product structure, developing database, and developing interface for modeling product and its variants.”

References

• Avak B. (2006).Variant Management of Modular Product Families in the Market Phase, ETH ZURICH, pp. 25-28, 52-53, 109-111.
• Grubbström R. W., Huynh T. T. T. (2006). 18th ICPR paper: Analysis of Standard Ordering Policies within the Framework of MRP Theory, Department of Production Economics, Linköping Institute of Technology , Linköping, pp 1-3.
• Martawirya Y. Y., Raharno S., Nurhadi I. (2008). Development of Bill of Materiale of Produkt Variants. Mechanical Engineering Department, Faculty of Mechanical and Aerospace Engineering, Indonesia, pp 2868-2869.
• Sanders N. and Council of Supply Chain Management Professionals (2014). The Definitive Guide to Manufacturing and Service Operations, The: Master the Strategies and Tactics for Planning, Organizing, and Managing How Products and Services Are Produced, Lehigh University, New Jersey, pp 9-10.

Footnotes

Author: Daniel Żołna