Distribution Resource Planning

24th September 2022 0 By indiafreenotes

Distribution resource planning (DRP) is a method used in business administration for planning orders within a supply chain. DRP enables the user to set certain inventory control parameters (like a safety stock) and calculate the time-phased inventory requirements. This process is also commonly referred to as distribution requirements planning.

DRP uses several variables:

  • The required quantity of product needed at the beginning of a period
  • The constrained quantity of product available at the beginning of a period
  • The recommended order quantity at the beginning of a period
  • The backordered demand at the end of a period
  • The on-hand inventory at the end of a period

DRP needs the following information:

  • The demand in a future period
  • The scheduled receipts at the beginning of a period
  • The on-hand inventory at the beginning of a period
  • The safety stock requirement for a period

DRP distribution works by either a pull or push method. The pull method has goods move up through the network by fulfilling customer orders. This provides more availability for consumers because local management controls the availability of the goods. However, managing distribution inventory can be difficult because every order is new to the supplying location as demand flows up the network. This is called the “bullwhip effect:” small changes in consumer demand that generate large swings in demand higher up the network.

In contrast, the push method sends goods down through the network. It generally has lower costs because shipments are planned globally and stored centrally. However, service levels can suffer if central planning is too far removed from the actual demand.

DRP ideally combines the service levels of pull with the efficiency of push, but this depends on accurate forecasts and stable processes to be successful. If both of these exist, DRP produces high fulfillment performance with minimal inventory. Companies usually try to hedge their bets by using safety stock, but that can reduce the overall effectiveness of the DRP strategy, resulting in higher inventory levels or shortages.

Advanced Planning and Scheduling (APS) Software

Advanced Planning and Scheduling Software’s have become a must for modern-day manufacturing operations as customer demand for increased product assortment, fast delivery, and downward cost pressures become prevalent. These systems help planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans. APS systems can be quickly integrated with ERP/MRP software to fill the gaps where these systems lack in terms of planning and scheduling flexibility, accuracy, and efficiency.

  • Synchronize supply with demand to reduce inventories
  • Enable scenario data-driven decision-making
  • Create optimized schedules that balance production efficiency and delivery performance
  • Maximize throughput on bottleneck resources to increase revenue
  • Provide company-wide visibility of resource capacity