Demand refers to a specific quantity per unit time which a customer is able and willing to buy at an alternative price while other factors are held constant (Slack, Chambers & Johnston, 2010). This study focuses on two types of demand which are dependent and independent demand.
Dependent demand has its aspects foreseeable or predictable. It depends upon specific factors which are clearly knowledgeable to everyone and can be controlled by the firm (Slack et al, 2010). For example, if a publishing company’s previous demand forecast shows that 5000 books are sold each week, then the firm’s production team is able to produce these books because they are sure that the market demand depends upon their production schedule (Slack et al, 2010).
Independent demand refers to the aspects which the firm is not able to control. It comprises of; government policy, climate change, cultural beliefs and change in tastes and preferences.
For example if a multinational company manufacturing pork may decide to launch new investments in a country where pork consumption is considered a taboo and although this company may be doing a very good job, the cultural beliefs can become a constraint to its operations since the firm has no control over the aspects of culture. Furthermore, the government policy has to be considered especially in cases where a specific commodity is considered to be illegal.
Scheduling of demand enables the firm to be able to predict possible outcomes of results based on the distinct types of demand. The aspects considered in preparing a schedule of demand are the price of the product and the quantity demanded at a given time (Slack et al, 2010). In the case of dependent demand, scheduling acts as an aid in ascertaining the demand needs of the customers in a specific time frame.
Scheduling of demand does not have a significant impact in the case of independent demand because its aspects are unpredictable. For example, a company producing umbrellas cannot predict the weather patterns and hence it is not possible for the company to know when it will rain so that they produce a lot of umbrellas. Therefore, when it comes to the case of independent demand scheduling is not very effective. Thus, the type of demand considered has a very massive impact on the process of demand scheduling.
The bill of material refers to the specific constituents needed to be able to produce a specific commodity and it is essential since the firm cannot meet its demand if the raw materials needed for production are not available (Slack et al, 2010).
The availability of raw materials is of utmost importance to any firm and in most cases many firms launch new investments near regions where raw materials are easily accessible. For example, a sugar processing company will prefer to launch investments in the areas where sugar plantations are available. This will enable the operations of the company to be swift hence the going concern of the company becomes assured.
In addition, in cases where the raw materials needed are located at distant places the firm will have to incur a lot of costs such as transport and storage so as to access the materials. Thus, in the long run these costs end up reducing the profits earned by the firm. More so, the aspects of demand are of utmost importance and if they are ignored the effects become detrimental to the firm.
Reference
Slack, W., Chambers, S., & Johnston, R (2010). Operations Management. Essex, England: Pearson Education Limited.