What is Distribution Requirements Planning (DRP)?

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.

The need for more detailed distribution planning led to the emergence of distribution requirements planning (DRP) during the1970s. 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 the1980s 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

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

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Distribution resource planning (DRP) is a method used in business administration forplanning orders within a supply chain. DRP enables the user to set certain inventory control parameters (like a safety stock) and calculate the time-phased inventoryrequirements.

Distribution Requirements Planning (DRP) is a system of forecasting when the various demands will be made by the system on central supply.

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Distribution resource planning (DRP) is a method used in business administration for planning orders within a supply chain. DRP enables the user to set certain inventory control parameters (like a safety stock) and calculate the time-phased inventory requirements. This process is also commonly referred to as distribution requirements planning.

DRP uses several variables:

• the required quantity of product needed at the beginning of a period
• the constrained quantity of product available at the beginning of a period
• the recommended order quantity at the beginning of a period
• the backordered demand at the end of a period
• the on-hand inventory at the end of a period

DRP needs the following information:

• the demand in a future period
• the scheduled receipts at the beginning of a period
• the on-hand inventory at the beginning of a period
• the safety stock requirement for a period 

Distribution requirements planning (DRP)

DRP determines 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 material requirements planning logic to become gross requirements on the supplying source. The extension of DRP into the planning of key resources contained in a distribution system is called DRP II