Here, when t he 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.
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 the operations and the demand for the end product.
For instance, if a toy wagon is the subject, then the wagons would fall under independent demand, while the wh ...Show more