Tires used in the assembly of a car would be an example of what type of demand?

The type of demand represented by tires used in the assembly of a car is categorized as dependent demand. This classification arises because the demand for the tires is directly tied to the production of a finished product, namely the car itself.

Dependent demand refers to the requirement for components or materials that is contingent upon the demand for the final product. In this case, the number of tires needed is based on how many cars are produced. If a manufacturer increases its production rate of vehicles, it will consequently require more tires to match that production. This relationship illustrates the nature of dependent demand, as the need for tires is not independent; rather, it is derived from the production schedule and inventory levels of the cars.

Understanding the concept of dependent demand is crucial for supply chain management because it allows businesses to effectively plan and manage their inventory levels and production processes, ensuring that component parts like tires are available when needed without overstocking.

In contrast, independent demand pertains to end products sold directly to customers, with demand levels not influenced by the production of other goods. Hence, recognizing the distinction between dependent and independent demand is fundamental to supply chain efficiency and inventory management.