Blackwell Reference Online

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An operation that produces components which go into an assembled product need not treat demand as a totally random variable: it knows that it is dependent upon the demand for the finished product. The process of determining dependent demand is also relatively straightforward. In the example given, it will consist of examining the manufacturing schedules for the assembled product and deriving the demand for the part from these. For every finished assembly that is to be manufactured on a particular day, it is simple to calculate that the number of parts that will be demanded by the assembly plant on that day is the number of assemblies produced multiplied by the number of parts per assembly. Material requirements planning (MRP) is one such dependent demand approach. Conversely, independent demand is less predictable because its underlying causes are, by definition, not fully understood. In such circumstances, demand must be treated to a certain extent as random and operations have little choice but to take decisions on how they will supply demand without having any firm forward visibility of customer orders. They must make planning and control decisions based on demand forecasts and in light of the risks they are prepared to run of being unable to supply demand. Independent demand planning and control makes “best guesses” concerning future demand, attempts to put the resources ... log in or subscribe to read full text