A Replenishment Philosophy of Inventory Management - Essay Example

Summary

In the paper “A Replenishment Philosophy of Inventory Management” the author discusses the difference between a requirements philosophy and a replenishment philosophy of inventory management. Demands could be classified under two types: the Dependent Demand and the Independent Demand…

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A Replenishment Philosophy of Inventory Management

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Subject: Management
Type: Essay
Level: High School
Pages: 1 (250 words)
Downloads: 4

Extract of sample "A Replenishment Philosophy of Inventory Management"

Dependent Demand, on the other hand, is governed by the Requirements Philosophy, wherein the demand is also created due to the operations. Here, when the inventory of raw materials is over, it does not prompt a requirement. The entire action is towards coming up with the end product or the complete product.It is important to distinguish between both the philosophies since goods are classified as end products and raw inventory. Each of these is governed by a particular kind of demand, which in turn, is governed by the above philosophies.

Therefore, inventory management requires the differentiating between the two philosophies.2. In what ways do independent-demand inventories differ from dependent-demand inventories Independent demand inventories are the ones that include the finished goods or the spare parts of these goods. The demand is independent of the operations and is solely dependent on the market conditions. On the other hand, dependent demand inventories are unfinished raw materials that go into the making of goods. These are governed by the demand for the end product as well, apart from the market conditions.

Therefore, it is dependent, not only on the market scenario but also on the operations and the demand for the end product. For instance, if a toy wagon is a subject, then the wagons would fall under independent demand, while the wheels, whose number would depend on the number of wagons, would be independent demand. This is the difference between dependent demand inventories and independent demand inventories.3. Why is demand history irrelevant for the management of raw materials and work-in-process inventories Demand history is irrelevant for the management of raw materials and work-in-process inventories since the demand for these is created by the demand for the finished end products.

It is dependent on the operations that go in towards this end, rather than the pre-demand conditions of the products. Let us reconsider the case of the toy wagons. The toy wheels cannot be produced on the basis of the demand history fo the toys since it would definitely depend on the demand for the wagons at the current market scenario.

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