Discuss dependent versus independent demand as it is related to ...

[tsand2]

Discuss dependent versus independent demand as it is related to inventory.

Question 2

Marketers try to determine ROI or ROMI, which is basically a breakeven for an advertising expenditure.
 a. True
  b. False
 Indicate whether the statement is true or false

[sokh]

Answer to Question 1

Demand for a given inventory item is termed independent when such demand is unrelated to the demand for other items. Conversely, demand is defined as dependent when it is directly related to, or derives from, the demand for another inventory item or product. For example, the demand for a laptop computer is independent, while the demand for its computer chip is dependent. This dependency can be vertical (the laptop needs the chip for assembly) or horizontal (the laptop needs an instruction manual for final delivery to customer).
So, for many manufacturing processes, basic demand for raw materials, component parts, and subassemblies depends on the demand for the finished product. In contrast, the demand for the end-use items, which are typically sold to a customer, is independent of the demand for any other higher-order manufactured item.

An important point to remember is that developing inventory policies for items exhibiting independent demand requires that forecasts be developed for these items. Alternatively, forecasting is less relevant for items having dependent demand, since the required quantities for these items depend entirely on the demand for the end-use product. So, once the difficult task of forecasting demand for end-use items is completed, determining the demand for dependent items requires simple calculations based on the bill of materials for that item.

Answer to Question 2

True

[tsand2]

Thank you

[sokh]

No problemo