Distinguish between dependent and independent demand in a McDonald’s restaurant, in an integrated manufacturer of personal copiers, and a pharmaceutical supply house.
The dependent demand category is an add-on to the independent demand category.
a) Independent demand
The need for components, raw materials, or sub-assemblies is referred to as dependent Demand. This demand does not exist until a parent item, which is often a product, is in demand.
b) Dependent demand
The desire for a finished product that is requested by a third party is known as independent demand. Independent demand is difficult to forecast because it is susceptible to the whims of client requirements, which can be impacted by things such as general economic situations, changes in fashion, and even the weather.
a) Independent demand is the sort of demand that is not reliant on the desire for another product and is thus consumed independently, whereas dependent demand requires the fulfillment of the other demand first.
b) For a McDonald's restaurant, use the following formula: Independent Demand: Burgers and other food products have independent demand. Demand for water or soda, kinds of ketchup, and napkins are based on the demand for burgers and other meal products.
c) For a personal copier maker that is integrated: Demand on its own: The copier's demand is independent of all others, thus it must be predicted. The Bill of Materials is detonated to determine the prediction.
Develop a production plan and calculate the annual cost for a firm whose demand forecast is fall, 10,000; winter, 8,000; spring, 7,000; summer, 12,000. Inventory at the beginning of fall is 500 units. At the beginning of fall, you currently have 30 workers, but you plan to hire temporary workers at the beginning of summer and lay them off at the end of summer. In addition, you have negotiated with the union an option to use the regular workforce on overtime during winter or spring if overtime is necessary to prevent stock-outs at the end of those quarters. Overtime is not available during the fall. Relevant costs are hiring, $100 for each temp; layoff, $200 for each worker laid off; inventory holding, $5 per unit-quarter; backorder, $10 per unit; straight time, $5 per hour; over time, $8 per hour. Assume that the productivity is 0.5 units per worker hour, with eight hours per day and 60 days per season.
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