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Distribution Requirements Planning
Logistics Workshop Asia 2004
Phnom Penh, Cambodia10 – 14 May 2004
2
Distribution Requirements Planning
What is DRP?
DRP is the function of determining the time-phased requirement to replenish inventory at branch warehouses.
The sum of the requirements over different Distribution Centres again results in the time-phased requirement at the final supplier.
3
RCCP
CRP
Forecasting
Distribution Requirements
Planning
Material Requirements
Planning
Master Production Scheduling
Distribution Requirements Planning
4
Distribution Requirements Planning
Brewery
Central warehouse
Regional warehouse 1
Regional warehouse 2
Forecast / Sales information
Inventory flow (delivery)Sales Plan
RetailOutlet E
RetailOutlet D
RetailOutlet C
RetailOutlet B
RetailOutlet A
6
Distribution Requirements PlanningDemand DC 1
Planned Available week 1: 6,500 – 2,200 = 4,300Safety stock should be 1,500, so no order
Week
0 1 2 3 4 5 6 7
Gross requirement 2,200 2,000 2,000 2,100 1,800 1,900 3,300
Planned available 6,500 4,300 1,800 3,800 1,700 3,900 2,000 2,700
Planned order due 4,000 4,000 4,000
Planned order release 4,000 4,000 4,000
Product: Heineken 60 cl Leadtime: 2 weeksSafety stock: 1,500Order Quantity 4,000
7
Distribution Requirements PlanningDemand DC 1
Planned Available week 2: 4,300 – 2,500 = 1,800Safety stock should be 1,500, so no order
Week
0 1 2 3 4 5 6 7
Gross requirement 2,200 2,500 2,000 2,100 1,800 1,900 3,300
Planned available 6,500 4,300 1,800 3,800 1,700 3,900 2,000 2,700
Planned order due 4,000 4,000 4,000
Planned order release 4,000 4,000 4,000
Product: Heineken 60 cl Leadtime: 2 weeksSafety stock: 1,500Order Quantity 4,000
8
Distribution Requirements PlanningDemand DC 1
Planned Available week 3: 1,800 – 2,000 = - 200Safety stock should be 1,500, so minimal order 1,700
Week
0 1 2 3 4 5 6 7
Gross requirement 2,200 2,500 2,000 2,100 1,800 1,900 3,300
Planned available 6,500 4,300 1,800 3,800 1,700 3,900 2,000 2,700
Planned order due 4,000 4,000 4,000
Planned order release 4,000 4,000 4,000
Product: Heineken 60 cl Leadtime: 2 weeksSafety stock: 1,500Order Quantity 4,000
Order 4000, since order quantity = 4,000 (order release week 1)Planned available = -200 + 4,000 = 3,800
9
Distribution Requirements PlanningDemand DC 1
Planned Available week 4: 3,800 – 2,100 = 1,700Safety stock should be 1,500, so no order
Week
0 1 2 3 4 5 6 7
Gross requirement 2,200 2,500 2,000 2,100 1,800 1,900 3,300
Planned available 6,500 4,300 1,800 3,800 1,700 3,900 2,000 2,700
Planned order due 4,000 4,000 4,000
Planned order release 4,000 4,000 4,000
Product: Heineken 60 cl Leadtime: 2 weeksSafety stock: 1,500Order Quantity 4,000
10
Distribution Requirements PlanningDemand DC 1
Planned Available week 5: 1,700 – 1,800 = - 100Safety stock should be 1,500, so minimal order 1,600
Week
0 1 2 3 4 5 6 7
Gross requirement 2,200 2,500 2,000 2,100 1,800 1,900 3,300
Planned available 6,500 4,300 1,800 3,800 1,700 3,900 2,000 2,700
Planned order due 4,000 4,000 4,000
Planned order release 4,000 4,000 4,000
Product: Heineken 60 cl Leadtime: 2 weeksSafety stock: 1,500Order Quantity 4,000
Order 4000, since order quantity = 4,000 (order release week 3)Planned available = -100 + 4,000 = 3,900
12
Distribution Requirements PlanningDemand DC 2
Planned Available week 1: 3,000 – 700 = 2,300Safety stock should be 900, so no order
Week
0 1 2 3 4 5 6 7
Gross requirement 700 900 1,100 900 700 900 900
Planned available 3,000 2,300 1,400 2,100 1,200 2,300 1,400 2,300
Planned order due 1,800 1,800 1,800
Planned order release 1,800 1,800 1,800
Product: Heineken 60 cl Leadtime: 1 weekSafety stock: 900Order Quantity 1,800
13
Distribution Requirements PlanningDemand DC 2
Planned Available week 2: 2,300 – 900 = 1,400Safety stock should be 900, so no order
Week
0 1 2 3 4 5 6 7
Gross requirement 700 900 1,100 900 700 900 900
Planned available 3,000 2,300 1,400 2,100 1,200 2,300 1,400 2,300
Planned order due 1,800 1,800 1,800
Planned order release 1,800 1,800 1,800
Product: Heineken 60 cl Leadtime: 1 weekSafety stock: 900Order Quantity 1,800
14
Distribution Requirements PlanningDemand DC 2
Planned Available week 3: 1,400 – 1,100 = 300Safety stock should be 900, so minimal order 600
Week
0 1 2 3 4 5 6 7
Gross requirement 700 900 1,100 900 700 900 900
Planned available 3,000 2,300 1,400 2,100 1,200 2,300 1,400 2,300
Planned order due 1,800 1,800 1,800
Planned order release 1,800 1,800 1,800
Product: Heineken 60 cl Leadtime: 1 weekSafety stock: 900Order Quantity 1,800
Order 1,800, since order quantity = 1,800 (order release week 2)Planned available = 300 + 1,800 = 2,100
15
Distribution Requirements PlanningDemand DC 2
Planned Available week 4: 2,100 – 900 = 1,200Safety stock should be 900, so no order
Week
0 1 2 3 4 5 6 7
Gross requirement 700 900 1,100 900 700 900 900
Planned available 3,000 2,300 1,400 2,100 1,200 2,300 1,400 2,300
Planned order due 1,800 1,800 1,800
Planned order release 1,800 1,800 1,800
Product: Heineken 60 cl Leadtime: 1 weekSafety stock: 900Order Quantity 1,800
16
Distribution Requirements PlanningDemand DC 2
Planned Available week 5: 1,200 – 700 = 500Safety stock should be 900, so minimal order 400
Week
0 1 2 3 4 5 6 7
Gross requirement 700 900 1,100 900 700 900 900
Planned available 3,000 2,300 1,400 2,100 1,200 2,300 1,400 2,300
Planned order due 1,800 1,800 1,800
Planned order release 1,800 1,800 1,800
Product: Heineken 60 cl Leadtime: 1 weekSafety stock: 900Order Quantity 1,800
Order 1,800, since order quantity = 1,800 (order release week 4)Planned available = 500 + 1,800 = 2,300
18
Distribution Requirements PlanningDemand DC 3
Week
0 1 2 3 4 5 6 7
Gross requirement 700 600 900 800 600 600 700
Planned available 2,700 2,000 1,400 1,700 900 1,500 900 1,400
Planned order due 1,200 1,200 1,200
Planned order release 1,200 1,200 1,200
Product: Heineken 60 cl Leadtime: 1 weekSafety stock: 600Order Quantity 1,200
19
Distribution Requirements PlanningTotal Demand
Week
0 1 2 3 4 5 6 7
Requirement DC 1 4,000 4,000 4,000
Requirement DC 2 1,800 1,800 1,800
Requirement DC 3 1,200 1,200 1,200
Gross Requirement 4,000 3,000 4,000 3,000 4,000 3,000
20
Distribution Requirements Planning
Characteristics :
• Great emphasis on the assets in sourcing and distribution
systems, in particular on inventory levels
• DRP contributes to the reduction of stock costs
• Reduce inventory levels but more competitive service
levels (the costs of stocks represent a significant part of
cost price)
21
Distribution Requirements Planning
Brewery
Central warehouse
Regional warehouse 1
Regional warehouse 2
Forecast / Sales information
Inventory flow (delivery)Sales Plan
RetailOutlet E
RetailOutlet D
RetailOutlet C
RetailOutlet B
RetailOutlet A
22
Distribution Requirements Planning
DRP I versus Stock Replenishing System
(re-order point system)
Characteristics of re-order point methods:
• Using an average demand
• Determination of re-order time (not when product is needed)
• No warning for and anticipate for demand fluctuation
• No integration of stock levels in the chain ( Forester effect)
24
Distribution Requirements Planning
0
1000
1100
1160
1280
1400
Quantity
Time
manufacturer
40%
central
warehouse
28%
wholesaler
16%
retailer
10%
25
Distribution Requirements Planning
Important characteristics in DRP-I
• It calculates when present stock and goods in transit are used
• It generates the moments of receipt
• It generates the moment of sending the products
• Receipts will be taken into account for requirements planning
(the planning horizon will move on).
26
Distribution Requirements Planning
Advantages of DRP
• Possibility to complete the order with future orders to create full truck loads
• Orders can be communicated with the supplier in an early stage (improvement of the reliability).
• Parallel orders, which means peaks in transports can be signalled in an early stage.
• In case of disturbance, it offers possibilities to create solutions which are optional for the whole chain.
27
Distribution Requirements Planning
Advantages of complementation in the USA
• Improvement of the delivery reliability from 85% to 97%
• Decrease in inventories with 25%
• Decrease of the distribution costs with 15%
• Decrease of absolute stock with 80%