Distribution Requirements Planning
Distribution requirements planning (DRP) provides the basis for integrating supply chain inventory information and physical distribution activities with the manufacturing planning and control (MPC) system.
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Manufacturing Planning and ControlMPC 6th EditionChapter 10Distribution Requirements PlanningDistribution requirements planning (DRP) provides the basis for integrating supply chain inventory information and physical distribution activities with the manufacturing planning and control (MPC) system.AgendaDRP in the Supply ChainDRP links firms in the supply chainPlanning records carry demand information from receiving points to supply points and returns supply information to the receiving pointsDRP integrates key linkages in the supply networkDRP can be linked to the MPC systems of the manufacturer, customers, and suppliersSpans the boundary from internal to external MPCDRP Links to MPCDRP LinksexternalexternalinternalinternalDRP RoleDRP coordinates material flows through the physical distribution systemEffectively managing the flow of goods and inventories between the firm and the marketPlanned timings and quantities for replenishing inventories throughout the physical distribution systemProvides information to the master scheduler in a format consistent with MRP recordsDRP and the MarketplaceDRP starts at or near the marketplaceLocal demand data can help manage field inventoriesSpecial ordersPlanned inventory adjustments by customersDRP and Demand ManagementDRP information is key to developing logistics system management plansDRP and Master Production SchedulingDRP allows incorporation of records and information into the MPS systemExtends MPC visibility into the distribution systemCan have political costsBoundaries between supply chain partnersConvincing them of the value of integrationDRP collects detailed information in the field, summarizes it, and passes it along to the MPC systemBasic DRP RecordsRecords are maintained centrally as part of the MPC systemRecords are kept for stockkeeping units (SKU)Extends the bill of materials to define the SKU as an SKU in the field warehouseProduct isn’t “completed” until it has been delivered to the location where it satisfies customer demandDRP RecordOn handPeriod12345Forecast requirements2020202030In transit60Projected available balance452565452555Planned shipments6060Safety stock = 20, shipping quantity = 60, lead time = 2Forecast includes information on special orders and customer inventory adjustments“In transit” goods can’t easily be expedited or delayedTime-Phased Order PointTime-phased order point (TPOP) uses forecast information for requirements and a time-phased MRP approach to develop planned shipmentsTPOP record shows planned shipment dataAll demand sources (TPOP, service parts, interplant shipments) are considered by the DRP systemLinking Several Warehouse RecordsInformation about planned requirements from all field warehouses is passed along to the central facilityImplosion–process of bringing demand information back to the central facilityManaging Variations from PlanOne method for dealing with errors is to stabilize the information flowFirm planned orders–reduce variation by reviewing implications of change before allowing changes to occurError addback method–assumes forecasts are unbiasedShortages from one period are predicted to be made-up in the next (or excess sales are believed to result in reductions in the future)Less effective if the forecast is biasedSafety StockDRP allows carrying of safety stock at any location in the systemMore frequent replenishment reduces the necessary safety stockSafety lead time is also an optionUseful when delivery times are variableAggregating uncertainty from several locations allows safety stock reductionsRisk poolingData Integrity and CompletenessGarbage-in, garbage-outUse of aggregate forecasts, which are then broken down into detailed forecastsErrors can increase as total is disaggregatedForecast adjustments must be made carefully to avoid introducing systematic biasForecast adjustments should be monitoredInventory accuracy requires efficient, accurate transaction processingOrganizational SupportObjectives must consider inherent conflicts among functional groupsProblem SolvingChanging conditions cause uncertainty in the systemDemandChanging market conditionsChanging product linesChanges to marketing plansDRP records can anticipate these changes and minimize their impactPrinciplesTop-level DRP records should cover items in a location as close to the customer as possible.Local information and demand patterns should be incorporated into the DRP record at a warehouse and/or the customers’ MPC data should be used at customer locations.Data and performance measurement systems should be put in place to monitor forecast adjustments in the field.Matching supply to demand requires close control of supply as well as data on demand.PrinciplesProjections of future requirements should be used to decide inventory allocation in periods of short supply.Transparent records and consistent processing logic should be used to integrate the system.What-if analysis should be based on integrated records of the system.Uncertainty filters, like firm planned orders or error addback, should be available to the master production scheduler.The organization form should be consistent with the supply chain being managed.Quiz – Chapter 10A major tool in DRP systems is the ____________ record.Customer purchases are generally part of _________ demand.The time-phased order point (TPOP) approach uses what type of data to determine requirements?DRP systems can utilize both safety stock and safety lead time? (True/False)
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