Distribution Requirements Planning (DRP)

Distribution Requirements Planning – DRP – is the process of determining the right amount of manufactured goods to be shipped to each distribution center or warehouse in order to satisfy customer demand.

With Distribution Requirements Planning, the matching between customer demand and production planning is translated into purchase orders.

This process depends on actual demand signals, such as customer orders that are used to plan the gross requirements of the supply source.

A major challenge is the high levels of demand variability. In fact, the first step in Distribution Requirements Planning is the supply chain design, since it is critical to know how distribution, in other words, satisfaction, of demand takes place.

The Distribution Requirements Planning process ensures that goods are delivered in the most efficient way. This includes assessing the quantity of the various materials needed for production and determining precisely where and when they should be available.

In this way, the company will face a faster decision-making process with greater cost awareness and improved customer service due to the possibility of being able to operate in two phases — push and pull — in the former case, retailers will send orders to distribution centers, while in the latter, it will be the reverse.

The sedApta Distribution Requirements Planning solution uses both pull and push phases.

The first step of Distribution Requirements Planning within the sedApta Suite is to design the distribution network.

A key issue is to know how the distribution of demand takes place, that is, whether a preferential system is chosen by obtaining a unique association of the requesting node and the bidding node, or by defining a percentage distribution between bidding nodes.

sedApta supports the DRP process in three phases:

1. Master production scheduling
   The pull phase is performed by transforming external demand at the warehouse nodes into induced demand at the production nodes. The result is a replenishment plan for all production nodes in the infinite capacity logistics network.This will result in inventory optimization through safety stock calculations that achieve the level of service consistent with sales forecasts and financial and logistical parameters set, and greater inventory control that supports companies in determining the best management policy.
2. Finite capacity production
   The main objective of the second phase is to verify the feasibility of the replenishment plan generated at infinite capacity and release a production plan at finite capacity. This results in prioritizing demand, checking the capacity of production resources, verifying the material capacity, and managing any other production constraints.
3. Implementation
   The final process of DRP is the implementation that aims to plan the allocation of inventory throughout the logistics network with the main purpose of optimizing the profit margin.