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INDEPENDENT VS DEPENDENT DEMAND INVENTORY SYSTEMS Inventory items can be divided into two main types: Independent demand and dependent demand items. The systems for managing these two types of inventory differ significantly. An item has independent demand when we can’t control it or tie it directly to another item’s demand An item has dependent demand when the demand for an item is controlled directly, or tied to the production of something else. Independent demand and dependent demand items require very different solutions. By Cecil Bozarth , PhD North Carolina State University Author of "Introduction to Operations and Supply Chain Management," 2nd edition, Pearson, Prentice-Hall The MRP system in SAP Business One takes in a number of parameters as inputs and performs some level of analysis and generates recommendations that can either be accepted or rejected by the planner. One of the inputs of MRP is the bill of material, which is a list of all components (and in what quantity) needed to produce finished good(s). For example, the bill of material needed to produce a dinning set is 6 chairs and 1 table (supposedly). The demand for the dinning set here is independent while that for the chairs and table are dependent. An independent demand is a demand that is not based on the demand for another item while a dependent demand is based on the demand for another item. Hence, it can be concluded that the demand for the 6 chairs and the table is based on the demand for the table. Thus, you can forecast an independent demand while dependent demands are calculated based on the independent demand item. The role of the MRP therefore is to perform this calculation. Hence, is it right to say that MRP is a calculator? May be yes... Here are some links that will provide you with useful information on Inventory Systems /Independent vs. Dependent Demand: http://st-www.cs.uiuc.edu/users/hanmer/PLoP-97/Proceedings/haugen.pdf http://mgtclass.mgt.unm.edu/MMRogers/Mgt%20586/Unit%202/5_4%20Inventory.ppt
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