Definition

The 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.
Systematic process for determining which goods, in what quantity, at
which location, and when are required in meeting anticipated demand.
This inventory related information is then entered into
a manufacturing requirements planning (MRP-I) system as gross requirements
for estimating input flows and production schedules.

Read more: http://www.businessdictionary.com/definition/distribution-
requirement-planning
Distributions 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.
DRP
The 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 time
DRP
The 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 some
One 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 Sources
Material 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 Strategies
Sources of supply are optimized with:
1. Supply chain strategies
2. Sourcing strategies
3. Supply strategies
The sourcing strategy determines 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 of
1. 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 methodologies
Distribution requirements planning
Distribution requirements planning (DRP) in SYSPRO is designed to optimise the movement
of inventory in a multi-warehouse environment so that demands can be met effectively and
efficiently without relying on excessive stock holdings.
Companies that would typically use DRP include those in the wholesale or manufacturing
sectors which have regional demand fed by one or more supply warehouses or manufacturing
plants. DRP provides the drivers that enable the Requirements Planning module to
suggest Supply Chain Transfers from 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's Inventory, Purchase Orders, Sales Orders, Bills of
Materials, Work in Progress and Requirements Planning modules provides a comprehensive
view up and down the supply chain.
LAMAR SOFTWARE, INC.
SPECIALISTS IN MANUFACTURING AND DISTRIBUTION
Distribution 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 become
input 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 another
Purpose
Distribution 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 Flow
The 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.
Result
Once 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 II
In 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 units
2nd Month Forecast Volume - 7,500 units
Opening Stock - 1,500 Units
In Transit Stock - 1,000 Units
Safety Stock - 2nd Month Forecast Volume *(Safety stock days/No of Working days)
- 7500 *(5/25) = 1,500 Units
Net Requirement = 1st Forecast volume + Safety Stock opening Stock In Transit Stock
Net 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 means when the 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.