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This article explains how to create relationship between Parent and Child Pick-list. This is useful when you want to show only the pick-list that is related to the parent you selected.
For instance if you are selling cars, you want to show only the child pick-list (Volkswagen Golf) to the parent pick-list which is Brand (Volkswagen). It does not make any sense if you are viewing Volkswagen but you are seeing Toyota Corolla in the selection.