3/8/2011

Distribution Requirements Planning

DRP provides the basis for integrating supply chain inventory information and physical distribution activities with the Manufacturing Planning and Control system. Managing the flow of materials between firms, warehouses, distribution centers is a major issue in SCM. DRP helps manage these material flows. Just like MRP did in Manufacturing. Links firms in the supply chain b providing planning records Li k fi i th l h i by idi l i d that carry demand information from receiving points to supply points and vice versa.

DRP links to internal MPC system

At Front End: linkage is with demand management which connects it with the customers (via the MPS) MPS). At backend: linkage with vendors

3/8/2011

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.

3/8/2011

Supply Chain Planning Processes

Material Requirement Planning Component Requirement Demand Forecasting Demand Planning

Production Plan

Supplier pp

Plant

Warehouse

Logistics g

Retailer

DRP & Order Management

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 system. Continually adjusts changes in the demand, sending inventories from central warehouse to distribution centers where they are needed. 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.

3/8/2011

Supply Chain Planning Processes

Demand Mgmt Material Requirement Planning Component Requirement Production Plan DRP

Supplier

Plant

Warehouse

Logistics

Retailer

Distribution requirements planning and the logistic system

3/8/2011

DRP and MPS

DRP greatest payoff is from integrating records and information. Crossing the area of inter-firm MPC systems means negotiating with supply chain partners for sharing costs and benefits benefits. DRP permits evaluation of current conditions to determine if mfg. priorities need to be revised. Provides the master scheduler better info to match mfg output with shipment needs.

Basic DRP Record

Forecast requirements (Gross Requirements) In transit (Scheduled Receipts) Projected available balance (Available) Planned Shipments (Planned Order Releases)

3/8/2011

Field warehouse DRP record

Forecast requirements (Gross Requirements) In transit (Scheduled Receipts) Projected available balance (Available) Planned Shipments (Planned Order Releases)

DRP some major applications

Linking several warehouse records Record packaging bulk materials Bulk material and MPS lk l d Records for a single SKU, one warehouse over 4 periods. Same for shipments logic Same for error add-back

3/8/2011

Example of time phased order point (TPOP) record

1 Forecast requirement In transit Projected available 22 Planned shipments 7 40 32 17 40 42 27 12 40 37 15 2 15 3 15 4 15 5 15 6 15 7 15

Shipping=0, Safety stock =5, lead time =1

TPOP uses forecast and time phased MRP Quantity / Reorder Point Q/R Order when needed

Field warehouse to central warehouse records for DRP

Lead time is captured in the MPS /MRP of the warehouse

3/8/2011

FAS record for packaging bulk materials

FAS= Final Assembly Schedule

Bulk material record and MPS

3/8/2011

Records for a single SKU, one warehouse over 4 periods ( Shipment pre-poned due to SS shortfall)

Records for a single SKU, one warehouse over 4 periods with shipment logic: (Anticipated SS shortfall
did not trigger early shipment)

Firm Planned order

3/8/2011

Records for a single SKU, one warehouse over 4 periods with error addback ( warning about forecast correction after cumulative error> SS)

Error addback method

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 {Shitao Yang pg 275}

Consider national safety stock/ transshipment (by Brown)

10

3/8/2011

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. di i li

11

3/8/2011

Organizational support
Where does DRP fit within the Supply Chain Management? pp y g Do the KRAs include data integrity, and shipment data integrity? Do KRAs include Forecast and market estimation/correction ? Are there incentives for such activities? Are individual and group incentives in consonance with the g p requirements of the DRP process?

Problem Solving
Sales promotion Closing a warehouse Monitoring stock aging

12

3/8/2011

Sales Promotion

Warehouse closure

13

3/8/2011

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.

14