Distribution Requirements Planning

1
Distribution Requirements Planning

• Chapter 8
• Vollmann, Berry, Whybark, Jacobs

2
What is DRP?

• DRP provides the basis for integrating supply
  chain inventory information and physical
  distribution activities with the Manufacturing
  Planning and Control system.

3
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.

4
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

5
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.

6
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.

7
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.

8
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.

9
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.

10
Basic DRP Record

• Forecast requirements (Gross Requiremen)
• In transit (Scheduled Receipts)
• Projected available balance (Available)
• Planned Shipments (Planned Order Releases)
• Fig. 8.3

11
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

12
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

13
Management Issues with DRP

• Data integrity and completeness
• Organizational support
• Problem solving

14
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.

15
Organizational support

• Where does DRP fit within the Supply Chain
  Management? Fig. 8.13

16
Problem Solving

• Sales promotion Fig. 8.14
• Closing a warehouse Fig. 8.15
• Monitoring stock aging

17
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.