Dependent demand definition
/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. The concept occurs almost entirely within the production department, and is a key issue in materials management. A business can set up bills of materials for its products, which are then used to determine the amount of demand for component parts, based on the demand for finished goods.
Example of Dependent Demand
As an example of dependent demand, when a manufacturing company is producing electric golf carts, dependent demand consists of the production processes to construct the tires, motor, seats, steering wheel, controls, and chassis of however many golf carts are scheduled for production. Thus, if 100 golf carts are scheduled for production, the associated dependent demand includes 400 tires and 100 motors. In this case, the dependent demand for electric motors is based on a known factor, which is the number of golf carts to be manufactured. This allows the procurement department to reliably place orders with suppliers for 400 tires and 100 motors.
Dependent demand is usually calculated through a material requirements planning system.