Distribution Requirement Planning

What is Distribution Requirement Planning ?


Distribution Requirement Planning (DRP) can be used for determining inventory required to be maintained at different stocking locations. It also makes sure that various supply sources are adequate for meeting the demand. This tool is essential for implementing Just-in-Time Production (JIT) and logistics system.

It is a meaningful expansion of Manufacturing Requirements Planning (MRP). It is helpful in the scheduling of production resources. It is also helpful in resolving various capacity related issues such as raw material constraints. MPS shows daily or weekly machine and production schedule. With the help of MPS, MRP can be used for coordinating the purchase and receipt of various components and materials for assisting manufacturing plan.

Definition of Distribution Requirement Planning


DRP may be defined as :
"Distribution Requirement Planning is a planning approach that considers multiple distribution stages and the characteristics associated with each stage." 

Process of DRP


This process is used for coordinating the level of inventory, its receipt, disbursal and re-scheduling. The schedule is very important for DRP planning process. It helps in coordinating the requirements occurring throughout the planning period.

Benefits of Distribution Requirement Planning


DRP system offers many benefits as it helps with logistics and marketing. Following are the major marketing related benefits of this system: 
  • DRP helps in offering timely delivery of goods to its customers by integrating distribution centres.
  • The on-time delivery helps in reducing the amount of customer issues. 
  • This system is useful for predicting future requirements to avoid over or under stocking.
  • It facilitates better coordination with other functions including MRP.

Main logistics benefits of DRP system are as follows : 
  • By coordinating shipments, this system has helped in reducing distribution costs.
  • By correctly predicting the requirement of inventory, the system helps in maintaining optimal level of items.
  • It helps in saving space at the warehouse as over stocking is avoided.
  • It helps in better coordination between manufacturing and logistics departments as they need to work in close coordination in an integrated system.
  • The system can be used for simulating transportation and inventory requirements, thus improving budgeting process.

Constraints of DRP System


This system requires accurate numbers for proper functioning. The forecast done should be correct so that there is flow of goods through distribution. It also requires the forecast for each SKU (Stock Keeping Unit) and distribution centre. Following kinds of errors may occur in the process : 
  • The forecast may be incorrect.
  • The performance cycle should be stable and consistent.
  • If there are uncertainties in the system, then DRP may not prove to be very efficient. Such uncertainties may relate to vendors or supply chain. Because DRP cannot be treated as universal solution for the inventory management. So many companies are seen with substantial improvement in the performance by its use.

Difference between DRP and MRP


No.

DRP

MRP

1.

The customer demand on which the organization has no control helps in estimating DRP.

MRP is estimated by production schedule which is managed by the enterprise.

2.

DRP works in an independent demand situation.

MRP works in a dependent demand situation.

3.

DRP integrates after finished goods are present in the warehouse.

MRP regulates inventory till manufacturing or assembling is completed.

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