Distribution Resource Planning (DRP), often abbreviated as DRP, is an essential process in supply chain management. It aims to ensure the adequate availability of products and resources needed to meet customer demand effectively and efficiently.
Here are some key points related to Distribution Resource Planning (DRP):
Table of Contents
Definition of DRP
DRP (Distribution Resource Planning) is a process whose basic principle is to collect sales forecasts (including firm orders) and deduce the supply needs required at warehouses at each level of the network to meet these forecasts.
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To do this, DRP takes into account all constraints of the supply chain (lead times, logistics lot size, stocks, etc.).
DRP allows both sending a demand signal to all production units enabling them to build their production plan and, through “deployment,” calculating stock movement orders within the network.
DRP bridges the gap between physical distribution and production planning. Software for Supply Chain Management that integrates various logistics chain issues (such as SAP, BAAN) can also be found.
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Being close to its market through its warehouses, DRP plays a coordinating role, similar to that of MRP for production, but located upstream. The DRP logic involves gathering information from local demand specific to each area served by each warehouse and bringing it up to the central warehouse level and then to the factories.
Based on the provided calculations, the warehouse can manage its transports and stocks, determine its vehicle needs, and establish its replenishments.
Winning companies of the 21st century will have established customer/supplier partnership agreements and radically different ways of working.
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Three ingredients are necessary for accelerating information and material flows through the supply chain, namely:
- Systems that accelerate information flows (DRP and MRP-2)
- Techniques that stretch material flows (JAT/QT approaches)
- Tools that facilitate both rapid information and material flows (EDI for establishing DRP/MRP-2 connection; barcode for traceability)
Planning and scheduling systems such as Distribution Resource Planning (DRP) and Manufacturing Resource Planning (MRP-2) generate and maintain valid schedules throughout the chain.
These schedules not only reflect the accuracy of a company’s needs but also incorporate ongoing changes while remaining realistic.
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Just-in-Time (JIT) and Total Quality (TQ) approaches allow for the stretching of physical flows and address all forms of waste (excessive stock holdings, long setup times, large batch sizes, high safety stocks), resulting in improved quality and cost reduction.
Finally, EDI and barcodes are tools that facilitate information and material flows.
PDA: Master Production Schedule (derived from PDP) operational planning that executes in the short term at the detailed level of the item.
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DRP and MRP-2 tools benefit every actor in the supply chain by giving them the ability to anticipate change and better manage and control stocks and resources.
Distribution Bill of Materials consists of reproducing the structure and operation of the distribution network. It is necessary to specify:
- The number of warehouses to manage,
- Sources of supply,
- Products to be stocked per warehouse,
- Different modes of transport used,
- Delivery frequencies,
- Delivery batch sizes
Continuous Replenishment
The faster a product circulates in the chain, the greater the benefits for the company in terms of increased service levels, reduced stock holdings, and lower manufacturing costs.
To succeed, one must have the right information, in the right place, at the right time.
The concept of the pipeline: Continuous replenishment can be likened to a pipeline. If one wishes to reduce stocks while improving service levels (availability), the flow rate must be increased. The pipeline must be viewed as a whole and not limited to individual or isolated segments.
It is also important to identify all demand fluctuation factors that distort or impede the flow and ensure that the inventory management system integrates constraints and amplification phenomena as they occur. The closer to end-of-chain sales planning, the better the results.
In reality, the chain only consists of constraints and compromises to find.
New Concepts and Tools
Launching a continuous replenishment program requires changes in how customer needs are planned and synchronized with supplier capacities. Inter-company and inter-service working groups will need to collaborate on common themes. These groups will then use DRP and planning models such as transport and receipt capacity planning schedules.
Example: Customer needs are planned in relation to transport, receipt, and available space capacities. This allows procurement and logistics functions (at the customer’s end) to synchronize the ordering process with product transportation and reception before needs are communicated to suppliers.
People
For the smooth operation of a replenishment program, new communication methods must first be established. It is no longer about being a good seller or a good buyer; one must become a member of a multidisciplinary team and understand how purchasing and selling decisions influence the entire internal and external functions of the company. Information is only useful when it leads to decisions resulting in performance gains and profits.
It must be reliable, accurate, and up-to-date; otherwise, it is useless. Information validity contributes to 20% of the success of a replenishment program. Computer tools must distinguish between dependent and independent demand. One must be able to distinguish calculated and transmitted demand from one distribution level to the next from the forecast at each level of the network.
The Main Change is of Two Minimum Orders
On the one hand, customer stock management is entrusted to the supplier in such a way that the customer no longer worries about orders, leaving it to the supplier to “manage” to ensure the customer always has enough to work with or sell.
On the other hand, the customer (retailer, wholesaler, distributor) must be involved in planning with its suppliers rather than relinquishing responsibility. Integrated planning should translate into comprehensive financial plans including sales, purchasing, transportation, and storage schedules.
But this approach also requires a common approach to managing the entire supply chain and no longer just the supplier’s obligation to adapt to the customer’s system.
Launching a continuous replenishment program requires changes in how customer needs are planned and synchronized with supplier capacities.
It is necessary to work together in the same direction.
DRP is a cascading management process that determines the needs of stock locations and ensures that supply sources can meet demand.
The process takes place in three phases:
DRP receives the following input data:
- Sales forecasts by unit and warehouse,
- Customer orders to date (order backlog),
- Available stocks for sale per stock unit and warehouse,
- Orders placed and/or manufactured per purchased and/or manufactured product,
- Lead times for purchase, production, and distribution,
- Transportation methods used and delivery frequencies,
- Stock safety policies per stock unit and warehouse, minimum purchase, production, and distribution quantities.
DRP generates a simulation of resource needs over time to support logistics strategy. This includes:
- The products needed, how many, where, and on what date
- Transport capacity needs by vehicle type and warehouse
- Workforce, surface, and equipment needs per warehouse
- Stock investment needs
- Volumes of production and/or purchase needed per product and per supply source.
DRP compares resource needs to present and future availabilities of supply sources.
Actions are then recommended either to launch or delay a purchase or manufacture so that supply is synchronized with demand.
Conclusion
Distribution Resource Planning (DRP) is a critical process in supply chain management, ensuring the efficient and effective availability of products and resources to meet customer demand. By integrating sales forecasts, inventory data, and supply chain constraints, DRP enables companies to synchronize production and distribution activities, ultimately improving customer satisfaction and reducing costs.
Adopting DRP and related tools can lead to enhanced information and material flows, tighter coordination among supply chain partners, and better decision-making capabilities. In today’s dynamic business environment, implementing DRP is essential for staying competitive and responsive to market changes.
FAQs
What is DRP (Distribution Resource Planning)?
DRP, or Distribution Resource Planning, is a process that involves collecting sales forecasts and inventory data to determine the supply needs required at various levels of a distribution network. It helps in synchronizing production and distribution activities to meet customer demand efficiently.
What are the key inputs to the DRP process?
The key inputs to the DRP process include sales forecasts, customer orders, available inventory levels, lead times for procurement and production, transportation methods, delivery frequencies, and stock safety policies.
How does DRP benefit supply chain management?
DRP benefits supply chain management by improving inventory management, reducing stockouts and overstock situations, optimizing production and distribution activities, enhancing coordination among supply chain partners, and ultimately improving customer satisfaction while reducing costs.
What are some key components of a DRP system?
Some key components of a DRP system include sales forecasting modules, inventory management tools, order management systems, transportation management systems, and demand planning software. These components work together to ensure the efficient flow of goods through the distribution network.
How does DRP support decision-making in supply chain management?
DRP supports decision-making in supply chain management by providing timely and accurate information about inventory levels, demand forecasts, production schedules, and transportation requirements. This information helps managers make informed decisions about procurement, production, inventory allocation, and distribution, ultimately improving the overall efficiency and performance of the supply chain.