What is the difference between independent-demand inventories and dependent-demand inventories?

Answer 1

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.

For example, the demand for chairs of a table and the table itself is based on the demand for the table. The table in this example is the item with independent demand. Knowing this, one can forecast an independent demand while dependent demands are calculated based on the independent demand item. Business to business independent demands tend to be demands for such items as capital goods, office supplies, MRO (maintenance, repair, and operating) items, and anything else for which the dependency is unknown. Independent demands are usually handled with standalone purchase orders, although some items might be covered by contractual relationships such as volume, price and other agreements.