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Distribution

Requirements Planning
Chapter 8
Vollmann, Berry, Whybark, Jacobs
What is DRP?
DRP provides the basis for integrating
supply chain inventory information and
physical distribution activities with the
Manufacturing Planning and Control
system.
What is DRP?
Managing the flow of materials between
firms, warehouses, distribution centers.
DRP helps manage these material flows.
Just like MRP did in Manufacturing.
Links firms in the supply chain by
providing planning records that carry
demand information from receiving points
to supply points and viceversa.
DRP and the MPC linkages
In the Front End one of the linkages is with
demand management which connects it
with the customers (via the MPS).
In the Back End one of the linkages is with
the vendors.
Fig. 8.1
DRP and the Marketplace
DRP starts in the marketplace. Some firms
gather information on inventory levels and
product usage from customers.
This knowledge of their customer
requirements provides firms the
opportunity to make-to-knowledge.
This is specially true when they have
vendor managed inventories.
DRP Purposes:
DRP enables the firm to capture data,
including local demand conditions, for
modifying the forecast and to report
current inventory positions.
DRP provides data for managing the
distribution facility and the database for
consistent communications with the
customers and the rest of the company.
DRP & Demand Management
Demand management is the connection
between mfg. and the marketplace.
Plans derived from the DRP information
and shipping requirements are the basis
for managing the logistics system.
Continually adjusts changes in the
demand, sending inventories from central
warehouse to distribution centers where
they are needed.
DRP & Demand Management (Cont)
DRP is connected to the logistics system
By helping determine vehicle capacity
planning.
Helping loading.
Developing vehicle dispatching.
Determining warehouse capacity.
Provides the data to accurately say when
availability will be improved and delivery can
be expected.
DRP and MPS

DRP greatest payoff is from integrating


records and information.
Crossing the area of interfirm MPC
systems means negotiating with supply
chain partners for sharing costs and
benefits.
DRP permits evaluation of current
conditions to determine if mfg. priorities
need to revised.
Provides the master scheduler better info
to match mfg output with shipment needs.
Basic DRP Record

Forecast requirements (Gross Requiremen)


In transit (Scheduled Receipts)
Projected available balance (Available)
Planned Shipments (Planned Order
Releases)
Fig. 8.3
Time Phased Order Point
Figure 8.4
Linking several warehouse records Fig.
8.5
Record packaging bulk materials Fig 8.6
Bulk material and MPS Fig. 8.7
Records for a single SKU, one warehouse
over 4 periods. Fig. 8.8
Same for shipments logic Fig. 8.9
Same for error add-back Fig. 8.10
Safety Stock and DRP
When there is more uncertainty in terms of
timing, then it may be better to use safety
lead time.
When the uncertainty is in quantity then
safety stock may be better.
Carry safety stock where there is
uncertainty (near the customer) or where
there is some element of independent
demand
Management Issues with DRP
Data integrity and completeness

Organizational support

Problem solving
Data Integrity and completeness

A key issue is the use of aggregate


forecasts which are later on broken down
into detailed forecasts.
Forecast errors should be avoided
especially biased errors.
Management programs should be
established to monitor the process.
Inventory accuracy depends on transaction
process routines and discipline.
Organizational support

Where does DRP fit within the Supply


Chain Management? Fig. 8.13
Problem Solving
Sales promotion Fig. 8.14

Closing a warehouse Fig. 8.15

Monitoring stock aging


Monitoring Stock Aging
Use strict first-in first-out physical
movement.
Identify those products that may be
heading for a problem before it is too late.
Build in exception messages to flag
potential shelf life problems.
If demand is dropping forecast should be
reduced. Available inventory or in transit
should cover a larger period of time.
Maybe shipped to another warehouse.