🚚 DRP (Distribution Requirements Planning) is a process used to plan inventory replenishment across the distribution network. The right products are delivered to the right locations at the right time, optimizing stock levels and minimizing costs.

The main activities are calculating net requirements and scheduling stock transfers (STRs) - when and how much - from upstream locations (e.g., from central warehouses or manufacturing plants) to meet the net requirements on time
considering lead times capacity limitations at both supplying and receiving nodes.

🔢 Net Requirements = Forecasted Demand + Safety Stock - (On-hand Inventory + Scheduled Receipts).

🏭 The MPS (Master Production Schedule) provides a schedule for manufacturing: which finished goods need to be produced, how much and when.

The activities are inventory check (on-hand inventory, WIP, scheduled production), capacity & constraints review and plan production based on requirements, inventory, and capacity.


🚲 Let’s say a company manufactures electric bikes.

DRP: in the Netherlands the forecasted demand in the next 2 weeks is:

Amsterdam DC needs 50 bikes (30 + 20)
Eindhoven DC needs 40 bikes (30 + 10)

On-hand inventory: 10
Safety Stock : 5

🧮 Net Requirements (50 + 40) + 5 - 10 = 85 → tells Rotterdam plant how much it needs to supply.

MPS receives the net requirements and schedules production in the plant:

Week 1: Build 45 bikes
Week 2: Build 40 bikes

Note that the demand in week 1 is 60, but we can only cover 55: 45 + 10.

🧠 How does one take the best decision for the remaining 5 bikes?

In summary:

DRP → MPS: “This is how much bikes we need, when.”
MPS → DRP: “This is how much bikes we can produce and deliver.”

🔁 These two processes are generally done separately and there is a feedback loop: if production can't meet DRP requirements (due to capacity, materials, etc.), MPS sends feedback to DRP which adjusts transportation schedules, or even customer delivery dates.

Typically the planning is done using separate tools, e.g. ERP system (DRP) + Excel (MPS), or ERP + APS (no optimization) or Excel + Excel etc.

In an optimization type of solver we can do BOTH at the same time.

The input data is extracted from the ERP system and the results are send back to the ERP.

ERP -> Optimizer -> ERP

The solver considers all of the inputs, activities, constraints of MPS + DRP at the same time:

🔷 aggregate demand over the full network
🔶 calculate net requirements
💎 automatic MRP
🔷 check production and distribution constraints
🔶 plan transfers (STRs) and customer shipments (how much and when)
🔷 plan production (how much and when)
🔶 chose from which location to serve the customer demand
🔷 optimise production, inventory and transportation costs

The feedback loop happens instantly. This saves a lot of (planning) time and gives the full optimised picture of the end-to-end network.

For the sake of completeness we can say that MPS + DRP + MRP + MEIO = Network Optimization. Agree?

🎯 Anything to add?