What is Distribution Requirement Planning?

DRP – Distribution Requirement Planning

DRP is a recent concept and has logically evolved from MRP (Manufacturing Resource Planning). Thus DRP comprises in itself both the distribution planning and the manufacturing resource plans. The following diagram helps to better understand the broader concept of DRP.

DRP – Distribution Requirement Planning, coordinates inventory levels, plans inventory movement and (if necessary) reschedules inventory between levels. The fundamental DRP planning tool is the schedule, which coordinates requirements across the planning horizon. There is a schedule for each stock keeping unit (SKU) and each distribution facility. A SKU is a specific item purchased by the customer including color and size uniqueness. Schedules for the same SKU are integrated to determine the overall requirement for replenishment facilities such as a plant, warehouse.

Following are some benefits of using DRP:

1. Improved service levels that increase on time deliveries and decrease customer complaints.
2. Reduced distribution centre freight costs resulting from coordinated shipments.
3. Reduced inventory levels, since DRP can accurately determine what product is needed and when.
4. Improved inventory coordination with other enterprise functions, since DRP facilitates a common set of planning numbers.
5. Decreased warehouse space requirements because of inventory reduction.
6. Enhanced budgeting capability, since DRP can effectively simulate inventory and transportation requirements under multiple planning scenarios.