Distribution Requirements Planning DRP is a more sophisticated planning approach that considers multiple distribution slages and their unique characteristics, DRP is the logical extension of Manufacturing Requirements Planning (MRP), although there is one fundamental difference between the Iwo techniques. MRP is driven by a production schedule that is defined and con- trolled by management policy. On the other hand, DRP is driven by customer demand. So, while MRP generally operates in a dependent demand situation, DRP operates in an independent demand environment where uncertain customer demand drives inve tory requirements. MRP coordinates scheduling and integration of materials into fin- ished goods, and sa controls inventory until manufacturing or assembly is completed, DRP takes coordination responsibility once finished goods are received in the plant warehouse. DRP Process. Figure 10-13 illustrates the conceptual design of a combined DRP/MRP system that integrates finished goods, work-in-process, and materials plan- ning. The bottom half of the figure illustrates. an MRP system that time phases raw maierial arrivals to support the production schedule. ‘The result af MRP exccution is finished goods inventory at the manufacturing site. The top half of the figure illu: trates the DRP system that moves the finished inventory from the manufacturing site to distribution centers and ultimately to customers. DRP time phases the movements coordinate inventory arrivals 10 meet customer requirements and commitments. The MRP and DRP systems interface with each other via the finished goods inventory lo- cated at the manufacturing site, Close coordination between the two systems results in minimal need for safety stock. DRP coordinates inventory levels, schedules, and when necessary, reschedules inventory movement between levels, The fundamental DRP planaing tool is the schedule, which coordinates require ments across the planning horizon, There is a schedule for each SKU at each ware- house. Schedules for the same SKU are integrated to determine the overall require- ments for replenishment facilities such as a plunt warehouse, Figure 10-14 illustrates DRP planning schedules for three warehouses and a cen: tral supply facility. ‘The schedules are developed using weekly time inerements known as time buckets. Bach bucket projects one period of activity, Although Weekly incre ments are most common, daily ar monthly inerements can be used. For each site and SKU, the schedule reports current on-hand balance, safety siock, performance cycle length, and order quantity. In addition, far each planning period, the schedule reports gross requirements, scheduled receipts, and projected inventory on hand. Using the combination of requirements and projected availability, DRP determines the plannedFrovne 10-13 ‘Conceptual design of integrated DRE/MIRP system Diswrbation Diseetai Distribute ‘warehouse waretouse vwarcbune ‘warehouse ‘warchouse | — t J L | egional Regional a ae) Final sscrnty — Awnanufaciuriog) f t 7 van] Pan B confers necessary 10 meet anticipated requirements. Grass equicements reflect cus- tomer demand and other distribution facilities supplicd by the site under review, Far sealing Figure 10-14, the gross requirements of the central supply facitity reflect the demands of the Boston, Chicago, and San Diego warchouses. Scheduled rece the replenishment shipments planned for arrival at te distribution warehouse, Pro- {ected on-hand inventory refers (o the anticipated week-ending level. It is equal to the Prior week's on-hand inventory level less the current week's groxs requirements plas any scheduled receipts. While planning approaches to inventory management offer significant benefits there are some constraints to theireffeeti venessFicune 1-14 DEP planning process Boston Distribution Warsi Onshand balance: 352 Lead time: 2 weeks Suey ame: Ondegantlys ta | Paget eestor fa a awn i Chicago Ditton Warehowre vet Omhand bate. 20 Leadtimes backs ‘San Dicgo Distribution Warehouse Safety stock: 115 Onder quantity: #10 Onan balane, 10 end eWeek Z Suetyoki Deeks Overquinys 150 Le - thi on = <3 mame uta calito fins| tes - Shoppe Sess i lamrmamee | Pepe fintetaf tate) femetemeaoofsn| wal on| of aabae [maf Sa rm aoe = Central Supply Fuiy Sp Pel pe cee Sani Filigree St pete teat pe Setoy uch: 287 [tei - (oie as ssa sa [em Corser quay: 2200" ESS Pa (Tosi Rennes Pains Sis Sears: ee en piglet promt in Arsgyn “hee DP Hep Wien Sa isp First, inventory planning systoms require accurate and coordinated forecasts for ‘each warchousc. The Forecast is nocessary to direst the flow of goals through the sup ply chain. Ideally, the system dacs not maintain excess inventory al any location, 50 Title room for error exists in a lean inventory system. To the extent this evel of fore cast accuracy is posible, inventory planning systems operate well. Second, inventory planning requires eonsistent and reliable produet for move- iment between Warehouse facililies, While variable performance cycles can be ae- commodated through safety lead times, such uncertainty reduces planning system elfectiveness. “Tair. integrated planning systems are subject to system nervousness. oF frequent reschaduling, because of production breakdowns or delivery delays, System nervous- ness. leads f0 fluctuation in capacity utilization, rescheduling cost, and contusion in deliveries, This is intsasified by the Volatile operating environment characteristic of logistics. Uncertatntics such a transporiaion and vendor delivery reliability can cause an extreme DRP nervousness. While DRP is not the universal solution for in- enlory management, many firms have reperted substantial performance improve rents with ils use, As ilustrated ia Industry Insight [0-1, fonsoa & Johason is one sc fm