DefinitionThe DRP is a supply chain business process, which enables to anticipate the goods supply to the distribution centers, to the customers platforms (collaborative planning) over the whole horizon. It also helps to prioritize the stocks distribution in the short term. Finally, it is one of the entry points to the MPS (refer to our MPS brochure) because it provides production with a plan of accurate needs.Distribution requirements planning, which may also be called distribution resources planning is a technique to ensure that inventories, both incoming and outgoing are managed effectively. It is used within the business administration function to efficiently plan orders within the supply chain. The DRP will assist the user in setting various parameters for inventory control and then calculate the requirements over a certain length of time. Orders are phased in over a period of time, ensuring that stock is available when required, but conversely stock levels are not so high that there is waste generated by accommodating too much inventory.Systematicprocessfor determining whichgoods, in whatquantity, at whichlocation, and when arerequiredinmeetinganticipateddemand. Thisinventoryrelatedinformationis then entered into amanufacturingrequirementsplanning(MRP-I)systemasgrossrequirements forestimatinginputflowsandproduction schedules.

Read more:http://www.businessdictionary.com/definition/distribution-requirement-planningDistributions Requirements Planning is the method used by supply chain entities to plan orders in the whole supply chain taking into account the inventories to be kept along with buffer or safety stock, placing the orders with the manufacturer to replenish inventories to meet customer orders, etc.It is similar to materials requirements planning(MRP) except that MRP is used in manufacturing companies and DRP is used in logistics companies.DRP tries to efficiently carry out the whole process of completing customer orders byminimizing shortages and reducing the overall costs comprising of ordering, transporting and inventory holding costs.DRPThe need for more detailed distribution planning led to the emergence of distribution requirements planning (DRP) during the 1970s. DRP is a widely used and potentially powerful technique for helping outbound logistics systems manage and minimize inbound inventories. This concept extended the time-phase order point found in material requirements planning (MRP) logic to the management of channel inventory. By the 1980s DRP had become a standard approach for planning and controlling distribution logistics activities and had evolved into distribution resource planning. The concept now embraces all business functions in the supply channel, not just inventory and logistics, and is termed DRP II.DRP is usually used with an MRP system, although most DRP models are more comprehensive than stand-alone MRP models and can schedule transportation. The underlying rationale for DRP is to more accurately fore-cast demand and then use that information to develop delivery schedules. This way, distribution firms can minimize inbound inventory by using MRP in conjunction with other schedules.One of the key elements of DRP is the DRP table, which includes the following elements: Forecast demand for each stock-keeping unit (SKU) Current inventory level of the SKU Target safety stock Recommended replenishment quantity Replenishment lead timeDRPThe concept of DRP very closely mimics the logic of MRP. As with MRP, gross requirements consist of actual customer orders, forecasted demand, or some combination of both; scheduled receipts are the goods the distributor expects to receive from orders that already have been released, while goods that already are received and entered into inventory constitute the on-hand inventory balance. Subtracting scheduled receipts and on-hand inventory from gross requirements yields net requirements. Based upon the distributor's lot-sizing policy and receiving behavior, planned order receipts are generated. Firms may order only what they need for the next planning period or for a designated time period. Known as economic order quantity (EOQ), this involves a lot size based on a costing model. Alternatively, firms may be limited to multiples of a lot size simply because the supplying firm packages or palletizes their goods in standard quantities. Also, some distributors may require someOne important function of Enterprise Planning is logistic planning of items which are acquired from elsewhere within the organization. In Enterprise Planning, this type of supply is known as distribution. The distribution volume / quantity are planned in the form of planned distribution orders. Within the master-planning horizon, these planned distribution orders serve as a distribution plan. When a distribution quantity is planned, the related requirement of the item is passed on at the appropriate level of depot / warehouse, so that system can take this dependent demand into account.Setting up a structure for distribution planning is done by defining clusters and by modeling the goods flow through supply chain by supplying relationships and sourcing strategies.Clusters:Enterprise Planning uses clusters to model distribution structures within a site and/or between related sites. A cluster is a group of entities such as warehouses/ work centers. A cluster normally represents a geographical location, consisting of one or more warehouses (usually non-nettable warehouses) that are considered as one unit for planning purposes.

Clusters are used to specify groupings of entities so that relationships between entities can be defined. Entities belonging to a cluster do not have to belong to the same financial and / or logistic company of an organization. The notion of a clustered item is comparable to that of an item/warehouse combination under inventory module. The major difference is that a cluster can be an aggregate several warehouses.The concept of cluster is best illustrated by the following Example. Suppose distribution centers of a large retail organization are grouped into i) north, ii) south iii) east and iv) west clusters. All of them, in addition to getting some local supplies, are largely supplied by distribution orders from a central warehouse.The distribution requirement planning for north cluster, where supply chain comprises of one regional depot and three divisional depots, are shown in the following diagram:Cluster and Warehouse Hierarchy

It may be noted that the flow of demand is upward and the flow of goods can be in any direction.Supply Planning -Supply planning is the next important element of distribution requirement planning, which comprises of following:Supply SourcesMaterial requirements can be covered with three types of orders:1. Production orders.2. Distribution orders.3. Purchase orders.Distribution orders move the goods between clusters. Distribution orders are especially suitable for the situation where depots/ sales channels of an organization are spread throughout a large area.Goods Flow StrategiesSources of supply are optimized with:1. Supply chain strategies2. Sourcing strategies3. Supply strategiesThe sourcing strategydetermines whether a requirement is covered by production orders, distribution orders, or purchase orders. A combination of these sources is also possible. If the source is distribution, the system selects the suppliers (depots) on the basis of1. Supply strategies for internal suppliers.2. Supplying relationships which define extent of aggregation at cluster and item group level.If the source is purchase, system selects the suppliers on the basis of supply strategy for external suppliers.Supply Strategy:refers to the method by which the supply of plan items is divided over multiple suppliers. The supply strategy defines the priority rules and allocation rules that direct the planning engines in the choice of suppliers. There are separate supply strategies for external suppliers (planned purchase orders) and for internal suppliers (planned distribution orders)Supply Chain Strategy:The sourcing strategies and supply strategies are grouped in supply chain strategies. Supply chain strategies can be linked to scenarios and remains valid during a certain time period within that scenario. This functionality enables to flexibly change business strategy over time such as percentage of items to make, buy or distribute.The following figure shows how the concepts are related.

Enterprise 21s distribution requirements planning (DRP) software functionality performs time-phased requirements planning for single and multi-facility distribution organizations. This process calculates inventory requirements over time and automatically generates online purchase requisitions, which can be turned into purchase orders and inventory transfers.

Enterprise 21s DRP process uses customer demand in the form of sales orders and forecasts, inventory levels and associated replenishment methodologies, and supplier information including lead times and purchase order requirements. Through the DRP process, Enterprise 21 calculates expected inventory levels over time and generates purchase requisitions with appropriate time offsets to meet future projected inventory shortfalls. Buyers and material planners can review the purchase requisitions and automatically generate the necessary purchase orders and intercompany transfers to support the organizations inventory plan.

For multi-facility organizations, Enterprise 21s DRP process can be used for centralized purchasing, facility-based purchasing, or as a combination of these methodologies. Enterprise 21s distribution software functionality allows distributors to meet their inventory planning requirements while effectively managing inventory carrying costs.

Distribution Requirements Planning (DRP) Highlights Supports time-phased requirements planning for single and multi-facility distribution organizations Calculates inventory requirements over time and automatically generates online purchase requisitions Uses customer demand in the form of sales orders and forecasts Considers current inventory levels and associated replenishment methodologies Evaluates supplier information including lead times and purchase order requirements Calculates expected inventory levels over time and generates purchase requisitions Support the organizations inventory plan Supports online review of purchase requisitions and automatic generation of purchase orders and intercompany transfers Supports centralized purchasing, facility-based purchasing, or a combination of these methodologiesDistribution requirements planningDistribution requirements planning (DRP)in SYSPRO is designed to optimise the movement of inventory in amulti-warehouse environmentso that demands can be met effectively and efficiently without relying on excessive stock holdings.Companies that would typically use DRP include those in thewholesaleormanufacturing sectorswhich have regional demand fed by one or more supply warehouses or manufacturing plants. DRP provides the drivers that enable theRequirements Planningmodule to suggestSupply Chain Transfersfrom one warehouse to another rather than a purchase order on an external supplier or a job on production. Suggestions are based on the closest warehouse in a chain of supplying warehouses, resulting in stock being supplied from oversupplied warehouses to those with a demand.The integration between SYSPRO'sInventory, Purchase Orders, Sales Orders, Bills of Materials, Work in Progress and Requirements Planningmodules provides a comprehensive view up and down the supply chain.LAMAR SOFTWARE, INC.SPECIALISTS IN MANUFACTURING AND DISTRIBUTIONDistribution Requirements Planning (DRP) System Distribution Requirements Planning (DRP) is defined as: 1. The function of determining the need to replenish inventory at branch warehouses. A time phased order point approach is used where planned orders at the branch warehouse level are exploded via DRP logic to become gross requirements on the supplying 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 becomeinput to the master production schedule. Demand on the supplying sources is recognized as dependent, and standard DRP logic applies. 2. In certain cases where the distribution is for a limited number of items, but a balance must be maintained between multiple warehouse sites, master schedules based on actual schedules sales orders and sales forecasts may be used to drive the planning process through standard DRP logic. This may result in master production schedules for one or more production sites. If multiple warehouses or distributor inventories are present, the DRP system will attempt to balance their inventories by shifting available units between inventories based on parameters established by the user that indicate the level at which inventories may interact with one anotherPurposeDistribution planning covers the entire distribution network and proposes replenishment plans for individual stockkeeping units (SKUs) or stock storage locations. The proposed plan is based on stock situations, demand, scheduled arrivals and sourcing setup.Process FlowThe following diagram illustrates a full DRP business process:

Demand consists of the sales orders placed at distribution centers or at other organization units. Information on scheduled arrivals, including purchasing and production orders, and stock in-transit is extracted from the stock/requirements list stored in R/3 through program RMCPAMRP using message type LOISTD and IDoc LOISTD01. This program also transfers detailed stock information at the plant/material level.If the demand comes from forecasting, or a combination of sales orders and forecasting, the output from demand planning is used for distribution planning. This output can come directly from the external system or from R/3. Since forecasting results are stored in the information structures, they can be dispatched in the same fashion as the demand history using LIP message types and IDoc SOPGEN01.Distribution planning usually requires sourcing information to propose a replenishment plan for each SKU. In R/3, Quota Arrangement defines the proportion of replenishments based on other vendors and plants for materials at plant level. This can be used for sourcing in the external system. The DRP interface provides the BAPI call BAPI_QUOTA_ARRANGEMENT_GETLIST to retrieve the information for the Quota Arrangement.ResultOnce DRP planning has been completed in the external system, the results are passed to R/3 and used for creating or changing R/3 data objects. Since R/3 usually does not distinguish between manufacturing plants, distribution centers, or warehouses, and defines all of them as plants, planning results dealing with the movement of goods between these organization units should be converted into either stock transport requisitions or stock transport orders, depending on the integration design. Since planning results for production concern only production plants, they should be converted into production orders, or, in the case of repetitive manufacturing, planned orders in R/3. For the results to be processed using SOP and MRP modules, they must be returned to R/3 through SOP.Requisitions usually give the proposed quantities between plants, and are closed once stock transport orders are created from them. In 3.1G, the DRP interface provides a BAPI call BAPI_REQUIREMENT_CREATE to create and change requisitions. In addition, from Release 3.1H on, the interface provides a function module (REQUISITION_LIST_DELETE) for the external system to delete these requisitions.For the stock transport orders, both goods issue at the supplying plant and goods receipt at the destination plant should be carried out before a stock transport order is sent out. The DRP interface uses ALE message RECSHP to create, change and delete stock transport orders. The message type uses IDoc ORDERS02 and links to the function module IDOC_INPUT_REC_SHIPMENTS. It is more appropriate to use stock transport orders when the external system provides firmed planning quantities.Production plans are uploaded into R/3 planning table S076 through message type LIP076, and are converted to individual requirements for MRP through demand transfer. MRP then converts them to planned orders or purchase requisitions. R/3 4.0 will provide BAPI calls so that the external system can create independent requirements directly.

Demand Planning - DRP (Distribution Requirement Plan) - Part IIIn this session we will explore more about DRP.

DRP systems operate by breaking down the flow of finished goods from the manufacturing plant through the Distribution Network of warehouse and transportation modes. This is undertaken on a time-phased basis (in DRP terminology referred as time bucket) to ensure that the required goods flow through the distribution network system are available as and when required at right place, at the right time.

Integrated systems (Production, warehouse, transportation, forecast, Inventory etc) of this nature require sophisticated, computerized information systems as their basis.

DRP Requirements

Information Requirements :

a) Base Level Usage Forecast - Forecast data should be at SKU / Item level for Product axis and any level below warehouse or DC for customer. Product axis is SKU / Item level as the Company raise invoice at SKU / Item level to customer, whereas Distribution Network Design of that company decides the customer axis level.b) Distribution Network Design - Distribution Network Design may change from company to company of similar Industry. For example HP and Dell company manufacturing computer machines belong to computer hardware industry but their distribution network design differ as per given below diagram.

c) Inventory Status - Inventory availability status at various distribution centre level. This includes Transit stocks (ie stocks already dispatched from factory but not reached DC)d) Ordering data - Time phasing or schedule flow, the factory should deliver the materials to each DC. For example factory can be asked to dispatch an item to DC at Kolkata on weekly basis (Monday) whereas to another DC at Mumbai on Fortnightly basis due to lower demand in that region.

DRP Process Requirements :

a) Net Requirement (NR) computation - Forecast at SKU / DC level is used in the DRP process. However some Inventory referred as opening stock are already available at DC. There could be materials lying In transit i.e., materials which has already been dispatched from factory are yet to reach DC. These inventory i.e., opening and In transit stocks has to be adjusted or netted against the forecast volume to arrive net stock requirement at each SKU / DC.

Since demand is volatile in nature, the company may prefer to keep buffer stock referred as Safety Stock to meet unexpected demand fluctuation. Safety Stock criteria will differ for each item as per nature of product and each DC due to demand nature. For example Hundai Car company will keep different safety stock Norms for Santro and Accent Model due to categorization. Similarly the company keep different safety stock norms for Santro between DC at Northern and Southern Region due to demand nature.

Net Requirement is computed based on Forecast Volume + Safety Stock opening physical stock In transit stock.

Let us take an example of Santro car at Delhi DC. The forecast volume for next two months are 9,000 and 7,500 Units respectively. Delhi DC is already having 1,500 Units as opening stock and expected to receive In Transit stock of another 1,000 units in next two days. DC is expected to keep 5 days stocks of second month forecast volume as safety stock. Assuming 25 days are working days in a month. Then how to compute Net Requirements ?

Solution :

Ist Month Forecast Volume - 9,000 units2nd Month Forecast Volume - 7,500 unitsOpening Stock - 1,500 UnitsIn Transit Stock - 1,000 UnitsSafety Stock - 2nd Month Forecast Volume *(Safety stock days/No of Working days)- 7500 *(5/25) = 1,500 UnitsNet Requirement = 1st Forecast volume + Safety Stock opening Stock In Transit StockNet Requirement (NR) = 9000 + 1500 1500 1000 = 8000 Units

Hence the Hundai Manufacturing plant will produce 8000 units of Santro instead of 9000 units against the Delhi DC requirements. Please note that Safety Stock computation methodology differ from company to company.

b) Time Phasing Requirement : Time Phasing meanswhenthe company wants to move the products from Manufacturing plant to DC. This could be monthly, fortnightly, weekly basis. As per above example if the Hundai plant decided to send 8000 units of Santro car so as to reach Delhi DC by 3rd of August to meet August Sales. Delhi DC has to keep huge godown to accommodate all 8000 units and require more manpower to maintain the santro cars at their end. However if the company decide to send 45% of NR i.e., 3600 units on 3rd, 35% of NR i.e., 2800 units on 13th respectively and 20% of NR i.e., 1600 units on 23rd August to Delhi DC. This enable the DC to keep minimal stocks at hand with optimum storage space and manpower by providing the good service level to the customers. For FMCG company like Cadbury the time phasing for Bournvita product could be once in 3 days. Time Phasing differs for each Product and DC.Time Phasing depends on Distribution Network Design. For example if manufacturing plant is located at Singapore and Central Distribution is located at Mumbai, the lead time i.e., shipping the product from Singapore to Mumbai is three months then the time phasing could vary according to demand for the product. Let us assume perfumes manufacture at French has got CDC at Mumbai and their lead time is three months. In this case the CDC may plan to get three months consolidated stocks once in three months to avoid stock out situation.

c) Planned order Release - In the earlier time phase we have given exact quantity and schedule date of stocks to be received at DC. However we need to communicate when the dispatch to be effected from plant so that the materials reach DC on scheduled date. In order to calculate the Planned order Release, we need to know the Lead time from Plant to various DCs. For example in the Hundai example the plant is located at Chennai and Lead time from Chennai plant to DC at Delhi is 7 days. The planned order release date should be 7 days less of schedule date and also to ensure that that day is working day.

One can understand that DRP is effective only if there is timely data sharing between different functions. Managing time phasing manually is another cumbersome process and hence it is recommended to have proper DRP package at your disposal which should be flexible and properly designed to cater the Distribution Network Design changes. DRP package should be more robust and flexible so that it can compute the quantity basis UOM, FTL (Full truck load).So far we have learnt about DRP and computation methodology with simple example. At the outset it may look easy but in reality defining time phase for each SKU at DC level is difficult part and this will keep on changing as per market dynamics. When the company is having more Products and DC then it lead to more complication and maintenance will become big issue. When the company changes its Distribution Network Design by opting for more plant or DC then the DRP module has to realigned accordingly.

In the next session we will learn more about DRP.