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.