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Distribution Requirements Planning
y DRP provides the basis for integrating supply chain inventory
information and physical distribution activities with the
Manufacturing Planning and Control system.
y Managing the flow of materials between firms, warehouses,
distribution centers is a major issue in SCM. DRP helps
manage these material flows. Just like MRP did in
Manufacturing.
n s rms n e supp y c a n y prov ng p ann ng recor s
that carry demand information from receiving points to
supply points and vice versa.
DRP links to internal MPC system
At Front End: linkage is with demandmanagement which connects it with the
.
At backend: linkage with vendors
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DRP and the Marketplace
y DRP starts in the marketplace. Some firms gather
information on inventory levels and product usage from
customers.
y This knowledge of their customer requirements provides
firms the opportunity to make-to-knowledge.
y This is specially true when they have vendor managed
inventories.
DRP Purposes:
y DRP enables the firm to capture data, including local
demand conditions, for modifying the forecast and to report
current inventory positions.
y DRP provides data for managing the distribution facility and
the database for consistent communications with the
customers and the rest of the company.
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Supply Chain Planning Processes
Demand PlanningMaterial Requirement Planning Demand Forecasting
Su lier Plant Warehouse Lo istics Retailer
ro uc on
Plan
omponen
Requirement
DRP & Order Management
DRP & Demand Managementy Demand management is the connection between mfg. and the marketplace.
y Plans derived from the DRP information and shipping requirements are the.
y Continually adjusts changes in the demand, sending inventories from centralwarehouse to distribution centers where they are needed.
y DRP is connected to the logistics system
y By helping determine vehicle capacity planning.
y Helping loading.
y Developing vehicle dispatching.
yDetermining warehouse capacity.
y Provides the data to accurately say when availability will be improved and
delivery can be expected.
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Supply Chain Planning Processes
Demand MgmtMaterial Requirement Planning
ro uc on
Plan
omponen
Requirement DRP
Supplier Plant Warehouse Logistics Retailer
Distribution requirements planning and the
logistic system
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DRP and MPS
y DRP greatest payoff is from integrating records and information.y Crossing the area of inter-firm MPC systems means negotiating
.
y DRP permits evaluation of current conditions to determine ifmfg. priorities need to be revised.
y Provides the master scheduler better info to match mfg outputwith shipment needs.
Basic DRP Record
y Forecast requirements (Gross Requirements)
y In transit (Scheduled Receipts)
y Projected available balance (Available)
y Planned Shipments (Planned Order Releases)
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Field warehouse DRP record
Forecast requirements (Gross Requirements)In transit (Scheduled Receipts)
Projected available balance (Available)
Planned Shipments (Planned Order Releases)
DRP some major applicationsy Linking several warehouse records
y Record packaging bulk materials
y Bulk material and MPS
y Records for a single SKU, one warehouse over 4 periods.
y Same for shipments logic
y Same for error add-back
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1 2 3 4 5 6 7
Forecast requirement 15 15 15 15 15 15 15
In transit
Projected available 22 7 32 17 42 27 12 37
Planned shipments 40 40 40
Shipping=0, Safety stock =5, lead time =1
Quantity / Reorder Point Q/R Order when neededTPOP uses forecast and time phased MRP
Lead time is captured in the MPS /MRP ofthe warehouse
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FAS= Final Assembly Schedule
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Records for a
single SKU, one
warehouse over 4
periods
( Shipment pre-poned
due to SS shortfall)
Records for a single
SKU, one
warehouse over 4
periods with
shipment logic:
(Anticipated SS shortfalldid not trigger early
shipment)
Firm
Planned
order
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Records for a singleSKU, one warehouse
over 4 periods with
( warning about
forecast correction
after cumulative
error> SS)
Error
addback
method
Safety Stock and DRPy When there is more uncertainty in terms of timing, then it
may be better to use safety lead time.
y When the uncertainty is in quantity then safety stock may bebetter.
y Carry safety stock where there is uncertainty (near thecustomer) or where there is some element of independentdemand {Shitao Yang pg 275}
Consider national safety stock/ transshipment (by Brown)
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Management Issues with DRP
y Data integrity and completeness
y Organizational support
y Problem solving
Data Integrity and completeness
y broken down into detailed forecasts.
y Forecast errors should be avoided especially biased errors.
y Management programs should be established to monitor theprocess.
y Inventory accuracy depends on transaction process routines and
sc p ne.
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Organizational support
y Where does DRP fit within the Su l Chain Mana ement?
y Do the KRAs include data integrity, and shipment data
integrity?
y Do KRAs include Forecast and market estimation/correction ?
y Are there incentives for such activities?
y Are individual and rou incentives in consonance with the
requirements of the DRP process?
Problem Solving
y Sales promotion
y Closing a warehouse
y Monitoring stock aging
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Sales Promotion
Warehouse closure
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Monitoring Stock Aging
y Use strict first-in first-out physical movement.
en y ose pro uc s a may e ea ng or a pro em e ore s
too late. Build in exception messages to flag potential shelf life
problems.
y If demand is dropping forecast should be reduced. Available
inventory or in transit should cover a larger period of time. Maybe
shipped to another warehouse.