Distribution requirements planning - ERP Tools

DRP is a parallel process to MRP. MRP determines the quantity of component items that are needed to make or assemble a finished good. DRP is an automated management process for the activities and techniques of maintaining the desired levels of finished goods items. DRP provides the proactive visibility of requirements based on the forecast and safety stock. Figure below shows a simple example of how DRP would work.

DRP planning for tables.

DRP planning for tables.

In this planning grid, an expected receipt can be seen in period 2. This order has already been released since the quantity appears in the scheduled receipts row. Additional receipts are expected in periods 3,4,6 and 7. These orders must still be released in periods 2,3,5,and 6. This visibility of order release and receipts provides the enterprise the capability of maximizing load configurations for transportation utilizing a DRPII process. In addition,the forward expected
order releases are an essential link in an integrated supply chain.

When DRP is used within the enterprise to proactively plan replenishment order,these expected orders could also be used to provide reliable promises to customers on available shipments through the use of available to promise(ATP). ATP is the uncommitted portion of inventory. This method of promising orders is frequently used in distribution. ATP is calculated only in the first time period and whenever there is an expected receipt. Another way to think about ATP is how long the inventory needs to last given the current customer backlog and the expected receipts.

Cumulative ATP shows how many pieces are available between receipts that have not been already committed. In some cases,there may be insufficient inventory to cover the demands that are already known in later periods. If the entire inventory from the previous receipts is used up,then customers who provided greater than expected visibility of their order may not get what they ordered when they wanted the product. To ensure that this inventory is available a process known as backward ATP is used to reserve that inventory to assure that the known customer orders will be covered. If the order entry personnel use the projected available balance rather than ATP to promise customer orders,customers who have provided the company with sufficient lead-time may be penalized,while customers who just called in may get product immediately. The ATP quantity should be used to promise orders to distribution customers.

As supply chain systems have become more powerful and sophisticated,the ATP concept has been expanded to include allocated available to promise(AATP). Even though a customer’s order may not be actually placed in the ERP system,the product is allocated to that preferred customer and is not available for general consumption. An example of AATP is shown in Figure below.

Allocated available to promise.

Allocated available to promise.

When the preferred customer places an order,the allocation is reduced by the quantity of that customer’s actual order. If the quantity exceeds the level that has been reserved,the overall ATP is then reduced. This kind of functionality is normally only found in supply chain integration systems and not as part of a traditional ERP system.


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