TYPES OF DEMAND
Independent demand
The demand for an item is unrelated to the demand for other items.
The two types of demand are independent and dependent. Independent demand is the demand for finished products; it does not depend on the demand for other products. Finished products include any item sold directly to a consumer. For example, if a company builds and sells CD cabinets, the demand for the CD cabinet is not dependent on anything else. The company could also sell decorative replacement hinges or handles as independent products. Figure 14-2 is a drawing of the CD cabinet. Although you can't see inside the cabinet, it does have four shelves.
Dependent demand
Demand for component parts is based on the number of end items being produced.
Dependent demand is derived from finished products. For example, when a company makes CD cabinets (see Figure 14-2), it needs tops, bottoms, feet, doors, door magnets, door hinges, door handles, screws, left sides, right sides, door catches, cabinet shelves, and shelf holders. The company can determine how many of each of these items is needed based on how many CD cabinets the company plans to build. If the company builds 100 CD cabinets, operations needs 100 tops, 100 bottoms, 100 doors, 100 left sides, 100 right sides, 200 door hinges (2 ...
