What is demand replenishment?

Demand-based replenishment is an approach that utilizes customer demand (“pull”) to replace and optimize inventory while reducing total net landed cost.

What is dependent demand?

Dependent demand is the demand for component parts, raw materials, or sub-assemblies. This demand does not occur until there is demand for a parent item, which is typically a product. Dependent demand is usually calculated through a material requirements planning system.

Which is an example of an inventory item with dependent demand?

Take the example of a Car. The car as finished goods is an held produced and held in inventory as independent demand item, while the raw materials and components used in the manufacture of the Finished Goods – Car derives its demand from the demand for the Car and hence is characterized as dependant demand inventory.

Is demand dependent on supply?

The precise number produced and consumed and the price at which this occurs depends on the interaction of the demand and supply of that product – demand being the number that consumers are wiling to purchase at each price, and supply being the number that producers are willing to produce at each price.

What is stock replenishment?

Inventory replenishment, also known as stock replenishment, refers to the process of moving products from inventory storage to picking shelves, or receiving ecommerce inventory from a supplier to stock it in a warehouse or fulfillment center.

Why is stock replenishment important?

Stock replenishment is an important aspect of inventory management, as it ensures the right stock items are being reordered to meet customer demand. Stock (or inventory) replenishment is the process of moving items along the supply chain so they are ready to be picked and shipped, thus fulfilling orders on time.

How is dependent demand calculated?

It is a common production planning concept used in ERP and MRP systems, dependent demand is calculated based on BOM bill of material needed to produce each particular finished product.

Should dependent demand be forecasted?

Dependent demands should be calculated not forecasted. is demand for an item that is unrelated to the demand of another item. Forecasting is done on independent demand items only.

How is dependent demand different from independent demand?

Independent Demand vs. Independent demand is the demand for a finished good, such as a car, while dependent demand is the demand for a component part of a finished good, such as the tires on a car. Dependent demand is derived from the demand for a finished good.

What are independent and dependent demands?

Demand is independent if it is unrelated to demand for any other product or service. Demand is dependent if it is derived from the demand for another product or service. Independent demand needs to be forecast; however, requirements for dependent demand are calculated from the independent items.

Is demand dependent on price?

However, in real life, the demand rate for a specific item can be affected by many variables such as the sale price and the availability of the item. Inventory models with price-dependent demand rates are based on the fact that lower selling prices tend to increase sales for many products.