Distribution requirements planning (DRP) is a systematic process to make the delivery of goods more efficient by determining which goods, in what quantities, and at what location are required to meet anticipated demand. The goal is to minimize shortages and reduce the costs of ordering, transporting, and holding goods.
Also known as
distribution replenishment planning, DRP is a time-based approach that determines when inventory is likely to be depleted and plans replenishment to avoid shortages. DRP uses a tree-like structure where a central facility, such as a warehouse, supplies regional facilities which then supply other facilities in the tree. This structure can contain any number of layers.
A key element of DRP is the DRP table, which usually includes elements that are important in the process, including:
- forecast demands
- current inventory levels
- target safety stock
- recommended replenishment quantities
- replenishment lead times
DRP distribution works by either a pull or push method. The pull method has goods move up through the network by fulfilling customer orders. This provides more availability for consumers because local management controls the availability of the goods. However, managing distribution inventory can be difficult because every
order is new to the supplying location as demand flows up the network. This is called the “bullwhip effect:” small changes in consumer demand that generate large swings in demand higher up the network.
In contrast, the push method sends goods down through the network. It generally has lower costs because shipments are planned globally and stored centrally. However, service levels can suffer if
central planning is too far removed from the actual demand.
DRP ideally combines the service levels of pull with the efficiency of push, but this depends on accurate forecasts and stable processes to be successful. If both of these exist, DRP produces high fulfillment performance with minimal inventory. Companies usually try to hedge their bets by using safety stock, but that can reduce the overall effectiveness of the DRP strategy, resulting in higher inventory levels or shortages.
number of vendors include DRP modules in their ERP software.
This was last updated in August 2015
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Production planning is the act of developing a guide for the design and production of a given product or service. Production planning helps organizations make the production process as efficient as possible. Production planning originated to optimize the manufacturing process, and today its general logic is applied in various forms to design,
production and delivery of software as well.
Why is production planning important?
Production planning is important because it creates an efficient process for production according to customer and organizational needs. It optimizes both customer-dependent processes —
such as on-time delivery — and customer-independent processes, such as production cycle time.
A good production plan minimizes lead time, which is the amount of time that passes between the placing of an order and the completion and delivery of that order. Depending on the company and the type of production planning necessary, the definition of lead time varies slightly. In supply chain management, for example, lead time includes the amount of time it takes for parts to ship from a
supplier. This is included because the manufacturing business needs to know when the parts will arrive to properly execute material requirements planning (MRP). This is especially important with tight manufacturing constraints or just-in-time (JIT) manufacturing.
Production planning process
The production planning process involves the following steps:
- Estimate product demand — This will a give a rough outline of how many products should be produced in a given time period. This estimate is generated by combining analysis of historical production trends with new potentially relevant trends in the market.
- Weigh production options — This
involves accounting for the resources on hand and exploring ways to most effectively use them based on projected demand estimates.
- Choose the most efficient option — The use of resources that is the least costly and most time-efficient should be chosen.
- Monitoring and evaluation — As the plan is carried out, companies monitor what is happening compared to what should be happening according to the plan, and evaluate how well those two match up.
- Adjust plan — This
involves altering the plan so that future production plans meet customer goals more efficiently and are more successful in their execution.
Types of production planning
There are many types of production planning that focus on various particulars of the production process. Some of these include:
- Master production schedule (MPS) — These are schedules for individual, specific
commodities to be produced in a given time period. They are often generated by software, and then adjusted by users.
- Material requirements planning — MRP is a system used for production planning, scheduling and inventory control. MRP ensures the availability of raw materials, maintains the lowest possible material and product levels in-house, and plans manufacturing and purchasing activities. It is often automated to some extent by software, but can be performed completely manually as
- Capacity planning — This is the process of determining what capacity an organization has to meet changing demands.
- Workflow planning — This is the planning of a sequence of operations performed by an employee or group of employees.
There are also various planning types that apply the logic of production planning to areas other than manufacturing, or complementary areas. For
example, human resources planning involves optimizing processes that allow a company to meet their hiring and talent demands. Other examples include:
- Enterprise resource planning (ERP) — This is the integration of main business processes into one unified system, often through the use of software.
- Sales and operations planning
(S&OP) — This is the process for more accurately matching a manufacturer’s supply with existing demand.
Production scheduling is like production control. Production scheduling is the allocation of available resources to production processes and events. It is
essentially the mapping of actual resources to the production plan built for them. Scheduling is used to plan use of factory equipment and resources, human resources, and to plan processes and material purchasing. Scheduling is necessary to create a production plan. Production plans aim to ultimately deliver on customer demand. The goal of a production schedule is to create the most efficient production plan possible.
History of production planning
Modern production planning has its roots in the first half of the 19th century. It developed out of a need for information around internal planning in control. Entities like railroads, textile mills and other factories needed internal administrative frameworks to guide the multiple processes involved in providing their basic product or service at a large scale.
The first production plans were simple. Factories were relatively small
and produced a limited number of products in large batch sizes. Factory foremen were technical experts in their field, and handled all planning and scheduling, which sometimes would include no more than a list of production orders and the date at which they were to be completed.
As the production line and manufacturing efforts as a whole became bigger and more complex, more involved production planning was necessary. By the beginning of the 20th century, plans began focusing on not just
delivering orders, but optimizing the processes required to do so, so that production process flow could be as even as possible at the minimum possible production cost.
Today, as the nature of production methods and manufacturing has changed, so has production planning. The technology surrounding production has evolved, enabling more precise communication and monitoring of and around production. The products themselves, and customer expectations, have also evolved. Now, there is more
information available than ever before for organizations to weigh when creating their production plans.
This was last updated in November 2020
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What is planning in supply chain management?
What is supply chain planning? Supply chain planning is the process of anticipating demand and planning materials and components to meet that demand, along with production, marketing, distribution and sales. The first part of this definition talks about anticipating the demand for products.
What is demand in supply chain management?
Demand planning is a supply chain management process of forecasting, or predicting, the demand for products to ensure they can be delivered and satisfy customers. The goal is to strike a balance between having sufficient inventory levels to meet customer needs without having a surplus.
How does improved planning improve the supply chain management process?
Good supply chain planning yields a number of benefits:.
Decrease costs. One advantage of good supply chain planning is the decrease in costs you’ll see in key areas. … .
Improved efficiency. … .
Increase output. … .
Better cooperation. … .
Increased profits. … .
Enhanced supply chain network. … .
What is the importance of demand management?
Why is Demand Management Necessary? To make the people who want the product happier, the manufacturer needs to have enough products in stock. Essentially, ensuring the right product is available at the right place, right time, in sufficient quantities.
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