Often called bill of materials (BOM) forecasting, this is usually demand that is dependent on the demand for the product in which it is a component. The exceptios when different amounts of a component part go into different versions of the product; this requires a special kind of forecasting, called statistical BOM forecasting. For example, the manufacturer of a large telecommunications switch may have 50 different component parts that can go in each switch, with the number of each component included varying from 0 to 5, depending on the customer order. Thus, the independent demand of customers for the switch, and the independent demand of customers for various switch configurations (and their resulting BOM), must be forecast to determine the dependent demand for each component part.
It is important to note that only one company in any given supply chain is directly affected by independent demand. The rest are affected by derived or depen- dent demand (or both). Equally important, the techniques, systems, and processes necessary to deam those of independent demand.
Recognizing the differences between independent, dependent, and derived demand, recognizing which type of demand affects a particular company, and developing techniques, systems, and processes to deal with that company’s particu- lar type of demand can have a profound impact on global logistics, supply chain costs, and customer service levels. We first explore the implications of independent and derived demand, followed by a model of the demand management function in global supply chain management. We will then move on to the role of sales fore- casting management within demand management.