Inventory Types what are the different inventory types? How do the typ

QUESTION

Inventory Types what are the different inventory types? How do the types differ? Why are some types said to have dependent demand whereas other types are said to have independent demand?
Inventory are the raw materials, work in process and finished goods that are the part of business assets and are ready for sale or will be ready for sale. Inventories are of great importance as they help in making a product. Effective inventory management is required to reduce the need for inventory. With proper inventory management, it is important to control various costs which are associated with the inventory. It is very important to analyze different ways to manage the inventory. Independent demand is the demand of the goods which are not affected by the demand of the other goods. This is the demand for the products which are considered as the end products and is directly concerned with the end consumers. The demand of these products is highly influenced by the market condition and is usually not related with the inventory held. Some of the products which have independent demand are television, mobile, refrigerator, automobile etc. Dependent demand is the demand of the products or inventory that is used to make or manufacture other product. The¦

demand of these products is highly influenced by the other product. Example: For manufacturing mobile, there are different items of products which are required. With increase in the demand of mobile, the demand of the associated products like plastic, screen, chips will also increase. It is important to manage and handle the material. For this the management needs to have a strong focus on material requirements planning. Material requirement planning is also one of the techniques in which the organization should focus on ordering the material as per the requirement in the manufacturing of the particular product. Raw material has dependent demand whereas finished goods generally has independent demand.

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