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.