Lesson 5
Independent vs. Dependent Demand:
What’s the Difference?
What’s the Difference?
Imagine you order a pizza. The pizza is your primary decision — that’s independent demand.
But pizza needs to be placed in something — a box. Without the pizza, nobody orders the box. That’s dependent demand.
In business, some products generate demand on their own, while others "follow" — like the box follows the pizza.
📌 Independent demand needs to be forecasted — we don’t know how many units the market will buy.
📌 Dependent demand can be calculated based on the BOM (Bill of Materials) or production plan.
📌 Real Business Examples 🖊 Example 1: BIC and Refill Cartridges
BIC produces pens and mechanical pencils. When a customer buys a pen — that’s independent demand.
But if it’s a reusable pen, demand for ink refills depends entirely on how many pens were sold.
🧻 Example1:
🛠 Tools: Excel SKU Dependency TableYou can easily create a dependency matrix in Excel:
Formula:
Dependent Demand = Main SKU Forecast × Multiplier
But pizza needs to be placed in something — a box. Without the pizza, nobody orders the box. That’s dependent demand.
In business, some products generate demand on their own, while others "follow" — like the box follows the pizza.
Type of Demand | What It Means | Examples |
Independent Demand | Demand generated directly by the market or customer | Finished products bought by customers |
Dependent Demand | Demand derived from another item or production plan | Packaging, components, refills |
📌 Independent demand needs to be forecasted — we don’t know how many units the market will buy.
📌 Dependent demand can be calculated based on the BOM (Bill of Materials) or production plan.
📌 Real Business Examples 🖊 Example 1: BIC and Refill Cartridges
BIC produces pens and mechanical pencils. When a customer buys a pen — that’s independent demand.
But if it’s a reusable pen, demand for ink refills depends entirely on how many pens were sold.
🧻 Example1:
- In June, 100,000 reusable pens are forecasted.
- If the average customer buys 2 refills → dependent demand = 200,000 refill cartridges.
Term (EN) | Meaning |
Independent Demand | Demand that originates from the market or customer behavior |
Dependent Demand | Demand driven by other items or internal plans (BOM, forecast) |
🛠 Tools: Excel SKU Dependency TableYou can easily create a dependency matrix in Excel:
Main SKU | Dependent SKU | Multiplier (Dependency Ratio) |
BIC Pen XYZ | Ink Refill | 2.0 |
BIC Shaver | Cartridge Pack | 4.0 |
Formula:
Dependent Demand = Main SKU Forecast × Multiplier
It is necessary to choose a visual aid that is appropriate for the topic and audience.
📊 Case: Shaver Handles & Cartridges – Dependent Demand in ActionThis chart shows the monthly sales of shaver handles (main SKU) and cartridge refills (dependent SKU) from 2020 to 2022.
What it tells us:
You don’t need to forecast cartridge sales from scratch — instead, you model them based on historical handle sales and consumption patterns.
What it tells us:
- The sales of cartridges closely follow the earlier sales of shaver handles.
- As more customers purchase razors, the future demand for cartridges increases — often with a delay.
- This is a classic example of dependent demand, where the volume of a secondary product is driven by the consumption of a primary one.
- The multiplier between shavers and cartridges (2× to 4×) can be used to forecast refill needs with more accuracy.
You don’t need to forecast cartridge sales from scratch — instead, you model them based on historical handle sales and consumption patterns.
📌 Add a stock column to see which dependent SKUs might cause bottlenecks.
🚫 Myth Myth: Demand is just “how much we sold.”
Reality:
Sales are the result — but demand may be hidden:
- Packaging ordered separately
- Components calculated from production
- Spare parts bought months later
🧠 Practice ExerciseYou're a Demand Planner at a coffee machine company:
- In July, the forecast is for 5,000 coffee machines
- Each comes with 1 milk frother and 2 water filters
- After 3 months, customers typically reorder 3 more filters
📌 What happens if sales increase by 10%?
📌 What risks might arise in component inventory?
📌 Key Takeaways
- Independent demand comes from the market and requires forecasting
- Dependent demand follows the logic of structure or production and can be calculated
- Great demand planning means knowing the difference — and planning both smartly
⚠️ Important Notice
These files were created using Microsoft Office applications (Word, PowerPoint, and Excel).
Please note that visual formatting, charts, and layout may appear differently in Google Docs or Sheets.
To ensure proper display and full functionality, we recommend opening the files in Microsoft Word, PowerPoint, or Excel.
These files were created using Microsoft Office applications (Word, PowerPoint, and Excel).
Please note that visual formatting, charts, and layout may appear differently in Google Docs or Sheets.
To ensure proper display and full functionality, we recommend opening the files in Microsoft Word, PowerPoint, or Excel.
