Principles of Distribution and Logistics

Distribution Requirements Planning (DRP)

Session 5

POM: Concepts and Applications

Session 5-1 © APICS CONFIDENTIAL AND PROPRIETARY
 Learning Objectives

• Describe distribution channel dependencies

• Detail “push” system functions
• Detail “pull” system functions
• Decide what to choose: reorder points or DRP?
• Define distribution requirements planning (DRP)
• Explore time phasing – the heart of DRP
• Understand the DRP planning grid
• Calculate the projected available balance (PAB) and
the DRP grid
Session 5-2 © APICS CONFIDENTIAL AND PROPRIETARY
 Learning Objectives (cont.)

• Calculate net requirements and the DRP grid

• Review the DRP planned order generation
• Perform PAB and net requirements recalculation
• Explore DRP and the bill of distribution (BOD)
• Outline the DRP planning process
• Perform a full DRP calculation

Session 5-3 © APICS CONFIDENTIAL AND PROPRIETARY

 Principles of Distribution and Logistics
Session 5

Distribution
Requirements
Planning (DRP)
Basics

Session 5-4 © APICS CONFIDENTIAL AND PROPRIETARY

 Distribution Channel Dependencies

Product Flow Plant Information Flow

Decoupling Point Replenishment Point
Central
Warehouse
Decoupling Point Replenishment Point
Local
Warehouse
Decoupling Point Replenishment Point

Customer

Session 5-5 © APICS CONFIDENTIAL AND PROPRIETARY

 “Push” or “Pull”?

Push Plant Pull

Central
Warehouse
Channel Demand
Allocation Requirement
Local
Warehouse

Customer

Session 5-6 © APICS CONFIDENTIAL AND PROPRIETARY

 “Push” System Functions
Aggregate Channel
Demand History

Central Inventory
Planning

Yes Stock
No
Resupply
OK? Order
Review Branch
Order Points Supplier
Inventory
Shipment
Allocation
“Fair-Share”
Allocation Order
Receipt
Echelon
Shipment

Session 5-7 © APICS CONFIDENTIAL AND PROPRIETARY

 “Push” System Functions (cont.)
Warehouses

DCs
55%
Manufacturing
Plant
45%
60%

40%
Forecasting –
Aggregate Production 65%
Requirements Lot Size
Allocation 35%
Allocation

Session 5-8 © APICS CONFIDENTIAL AND PROPRIETARY

 “Push” System Allocation - Example

15,000 x 12% = 1,800 units

1,800 x 40% = 720 units

720 x 30% = 216 units

Session 5-9 © APICS CONFIDENTIAL AND PROPRIETARY

 “Pull” System Functions

Local Facility Customer

Stock Status requirements

Stock Order point/

OK? DRP
No
Shipment
Interbranch
Resupply Order resupply order

Interbranch Distribution
shipments
Center
DRP Plant No Plant Order point
Plant Resupply Order Purchase
Stock Receipt

Session 5-10 © APICS CONFIDENTIAL AND PROPRIETARY

 “Pull” System Functions (cont.)

Warehouses
DCs

Manufacturing Master
Plant Schedule

Plant OP
MRP DRP

Order Planned
Shipment Orders
Planned
Orders
Order
Shipment

Session 5-11 © APICS CONFIDENTIAL AND PROPRIETARY

 What to Choose: Order Points or DRP?

OP OP
OP
SS SS
SS

Pulled by DC 1 Pulled by DC 2 Pulled by DC 3

Impact of an order
point (OP)
Quantity

Regional DC
distribution channel
Inventory pull on a Regional
DC from three
OP X satellite DCs

OP= order point Time

SS=safety stock
Session 5-12 © APICS CONFIDENTIAL AND PROPRIETARY
 Defining Distribution Requirements Planning
(DRP)
The function of determining the need to replenish
inventory at branch warehouses. A time-phased order
point approach is used where the planned orders at
the branch warehouse level are “exploded” via MRP
logic to
What become gross
is distribution requirementsplanning
requirements on the supplying
(DRP)?
source. In the case of multilevel distribution networks,
this explosion process can continue down through the
various levels of regional warehouses (master
warehouse, factory warehouse, etc.) and become
input to the master production schedule. Demand on
the supplying sources is recognized as dependent,
and standard MRP logic applies.

Session 5-13 © APICS CONFIDENTIAL AND PROPRIETARY

 Principles of Distribution and Logistics
Session 5

DRP Processes

Session 5-14 © APICS CONFIDENTIAL AND PROPRIETARY

 Time Phasing – The Heart of DRP
Solving the question of when in the inventory replenishment
equation!!
Answer:
Product KL-2000-10
Lead Time/days 2
Order Quantity 50 DAILY PERIODS
On Hand Inventory/units 55 1 2 3 4 5 6
Gross Requirements 20 35 25 25 45 65
Projected Available Balance 35 0 25 0 5 40
DRP Planned Order Receipt 50 50 100
DRP Planned Order Release 50 50 100

Session 5-15 © APICS CONFIDENTIAL AND PROPRIETARY

 Introduction to the DRP Grid

DRP Rows

1 2 3
Gross Requirements 100 110 125
DRP In Transit Receipts 200
Projected Available Balance 50 140 15
Net Requirements 0 0 0
DRP Planned Order Receipt 0 0 0
DRP Planned Order Release 0 200 200

Session 5-16 © APICS CONFIDENTIAL AND PROPRIETARY

 PAB and the DRP Grid

Answer:
Product KL-2000-10
Lead Time/days 2
Order Quantity 200 DAILY PERIODS
On Hand Inventory/units 150 1 2 3 4 5 6 7 8 9 10

Gross Requirements 100 110 125 130 120 110 150 135 165 145

DRP In Transit Receipts 200

Projected Available Balance 50 140 15 -115 -235 -345 -495 -630 -795 -940

Session 5-17 © APICS CONFIDENTIAL AND PROPRIETARY

 Net Requirements and the DRP Grid

Answer:
Product KL-2000-10
Lead Time/days 2
Order Quantity 200 DAILY PERIODS
On Hand Inventory/units 150 1 2 3 4 5 6 7 8 9 10

Gross Requirements 100 110 125 130 120 110 150 135 165 145

DRP In Transit Receipts 200

Projected Available Balance 50 140 15 -115 -235 -345 -495 -630 -795 -940

Net Requirements 0 0 0 115 235 345 495 630 795 940

Session 5-18 © APICS CONFIDENTIAL AND PROPRIETARY

 DRP Planned Order Generation
Product KL-2000-10
Lead Time/days 2
Order Quantity 200 DAILY PERIODS
On Hand Inventory/units 150 1 2 3 4 5 6 7 8 9 10
Gross Requirements 100 110 125 130 120 110 150 135 165 145
DRP In Transit Receipts 200
Projected Available Balance 50 140 15 85 165 55 105 170 5 60
Net Requirements 0 0 0 115 35 0 95 30 0 140

DRP Planned Order Receipt 0 0 0 200 200 0 200 200 0 200

DRP Planned Order Release 0 200 200 0 200 200 0 200 0 0

Back schedule of DRP

planned order receipt

Session 5-19 © APICS CONFIDENTIAL AND PROPRIETARY

 PAB and Net Requirements Recalculation

Product KL-2000-10
Lead Time/days 2
Order Quantity 200 DAILY PERIODS
On Hand Inventory/units 150 1 2 3 4
PAB6 5 7 8 9 10
Gross Requirements 100 110 125 Net
130 Requirements
Recalculation
120 110 150 135 165 145
DRP In Transit Receipts 200 Recalculation
Projected Available Balance 50 140 15 85 165 55 105 170 5 60
Net Requirements 0 0 0 115 35 0 95 30 0 140

DRP Planned Order Receipt 0 0 0 200 200 0 200 200 0 200

DRP Planned Order Release 0 200 200 0 200 200 0 200 0 0

Session 5-20 © APICS CONFIDENTIAL AND PROPRIETARY

 DRP Grid Exercise

Answer:
Product K2000-10
Lead Time/days 1
Order Quantity 150 DAILY PERIODS
On Hand Inventory/units 125 1 2 3 4 5 6 7 8
Gross Requirements 120 120 110 95 95 110 125 135
DRP In Transit Receipts 150
Projected Available Balance 5 35 75 130 35 75 100 115
Net Requirements 0 0 75 20 0 75 50 35
DRP Planned Order Receipt 0 0 150 150 0 150 150 150
DRP Planned Order Release 0 150 150 0 150 150 150 0

Session 5-21 © APICS CONFIDENTIAL AND PROPRIETARY

Session 5-22 © APICS CONFIDENTIAL AND PROPRIETARY
 DRP and the Bill of Distribution

ABC Electronics ABC Electronics ABC Electronics

DC 1 DC 2 DC 3

Resupply Demand
Resupply Delivery

ABC Electronics
Manufacturing Plant

Session 5-23 © APICS CONFIDENTIAL AND PROPRIETARY

 DRP Planning Process
DRP Generation

Determine Review Net

Gross Inventory Requirements
Requirements Balance Calculation
Total Demand OK? Quantities OK? Shortages OK?

Plan New
Orders OK?
Orders

DRP Order Release

Session 5-24 © APICS CONFIDENTIAL AND PROPRIETARY