DRP's distribution network defines the relationships among distribution centers, warehouses, manufacturing plants and vendors. It is similar to a bill of materials except that it describes the flow of finished goods from their source, through all distribution locations, to the ultimate consumer. DRP lets you easily define your unique distribution channels, whether you have a single distribution facility, a relatively simple network, or even a complex multilevel network with primary distribution centers serving other distribution locations. You also can designate different network configurations for different products, depending upon how they flow from their source to the consumer. Each distribution network configuration can consist of an unlimited number of locations and levels. The latest trend is to include end-customer's locations in the DRP network (customer connectivity). DRP will accommodate such a network.

Predicting Inventory Availability

To make sure the right products are available at the right time, in the right amounts, and in the right places, DRP links all of the locations in the distribution network together all the way down to the master production scheduling level or vendor scheduling level. DRP contrasts projected future demands, including safety stock, against projected available inventory so it can predict future shortages. It compares beginning inventory plus anticipated receipts to projected demand throughout the planning horizon. If a shortage is predicted, it automatically plans a receipt based on one of the several ordering rules that you can specify. Traditional inventory replenishment approaches, such as reorder point, cannot accurately make such predictions because they lack sufficient future visibility and are unable to consider the relationships among stocking locations. It is important that these relationships be considered, especially in business environments with multilevel distribution networks. For example, the majority of the Atlanta plant warehouse's requirements need not be forecasted (Download & print the Distribution Structure graphic {in WORD}). They can be derived from Denver's and New York's schedules of future planned orders because Atlanta fills these orders. Forecasts are only needed for demands serviced directly by Atlanta and, if applicable, they are added to this "derived demand" in order to calculate total requirements. As forecasts are consumed by current orders, DRP considers both the actual demand and the forecast to ensure that requirements always reflect the latest changes in demand. The resulting schedule of future planned orders for Atlanta is distribution's key interface to the master production schedule or vendor procurement schedule.

Managing Replenishment

The implementation of just-in-time (JIT) distribution and production requires optimum distribution and manufacturing schedules with precision timing. DRP's powerful on-line, real-time planning and "what if?" simulation capabilities help you streamline the planning cycle, shorten lead times, improve service, minimize inventory investment, and ensure consistent and realistic distribution and manufacturing schedules. DRP helps you maintain tight control of replenishment through its exception-and action-oriented design. While DRP performs many replenishment functions automatically, it also provides the detail you need to solve special replenishment situations. The system alerts you to potential problems before they occur and provides your inventory planners with clearly phrased decision guides that recommend specific corrective actions in an on-line, real-time mode. With DRP, you always have easy on-line access to detailed replenishment and requirements information. Once your replenishment plans are determined and approved, you can authorize the planned replenishment transfers real-time. DRP even helps you plan the most economical shipping methods.

Determining What Replenishment Actions Should Be Taken
DRP automatically derives a replenishment plan for every product at every location. By notifying you of the exceptions and prescribed actions that need attention, DRP allows you to better anticipate and avoid potential problems---even in today's complex environments involving thousands of items. As a result, you take corrective action before service is affected or capital is tied up in unproductive inventory. DRP is also easy to use. It guides you through the replenishment process with clear, concise action messages that communicate exactly what must be done and why.

Exception-Oriented Planner Action
Whenever the system encounters a problem somewhere in the replenishment process, the planner is automatically notified through on-line exception messages. Each DRP planner can "customize" the method by which conditions are presented, so those most important for that planner can be resolved quickly. Unlike traditional batch-oriented systems, DRP checks the result of any action on a location on the balance of the network --- real-time. This ensures that the DRP plan passed to production and distribution is fully coordinated across the distribution network. This is true real-time DRP.

Decision Guides
The messages that suggest replenishment actions are called decision guides. They instantly highlight and identify priorities for replenishment. The decision guides only recommend replenishment actions; the system does not execute any of these actions automatically. Instead, DRP evaluates all the factors and calls your attention to the situations that require your review and possible action. As a result, you are always in control of replenishment.

Paperless Planner Action --- real-time DRP
With DRP, planners can select and respond to exception conditions and recommended actions on-line, real- time without the need for optional paper reports. From the planner messages screen, each planner can select specific decision guide action messages for follow-up. The planner can then select item and location (stock- keeping unit or SKU) detail to determine what triggered the particular action. With the DRP Model screen, the planner can quickly determine the best actions to take.

DRP Model
The real-time DRP Model screen displays by item and location the current time-phased replenishment plan. With this screen, you can easily see the effects of changes in forecasts, demands, special demands, safety stocks, lead times, replenishment rules, time-phased minimum inventory targets or service levels. Since the new plan can be reviewed at each level in the distribution channel, you can quickly evaluate the effect of recommended actions and alternatives on replenishment plans, manufacturing schedules, purchasing requirements and warehousing schedules.

Detailed Requirements And Replenishments Information
Occasionally, you need additional information concerning time-phased supply and demand. DRP gives you this detailed information on-line, real-time, so you can thoroughly research any situation in an instant. When you need more detail on the sources of requirements, DRP gives you instant access to all of the different types of requirements, including forecasted demands and market demands from market unit forecasts (supplied automatically from DF), actual demands (supplied automatically from OMS, OP or linked to your in-house applications), composite demands (the net of forecast and actual demands), special demands and dependent requirements. Integrated information about forecasted and actual demands enables DRP to automatically react to forecast revisions and current order activity in "consuming" the sales forecast. The composite demand shows the effect of this process. Dependent requirements are anticipated orders generated from the replenishment plans at subordinate locations. If, for example, your distribution network is characterized by a central distribution location with other subordinate distribution locations supplying the anticipated orders, those other locations would be regarded as dependent requirements by the central location. DRP calculates those dependent requirements automatically.

Solving Inventory Replenishment Problems
DRP's time-phased approach to inventory planning can minimize or even eliminate most typical distribution problems such as too much inventory, too little inventory, inventory in the wrong locations, and obsolete inventory. However, because of uncontrollable events such as unanticipated demand fluctuations and transportation or production problems, inventory replenishment problems occasionally do occur. DRP is designed to provide exception-oriented information to alert you to problems, decision support information to help you select the appropriate remedies and the action-oriented capabilities you need to quickly implement their resolution.

Allocation Decision-Making
Sometimes distribution locations need more inventory than is available from their supplying facilities. DRP automatically recommends "fair share" allocations proportional to each location's true requirements, computing the amount of inventory that is available to each location without adversely impacting the amount that is available to any other location. This assistance helps ensure consistent service and helps minimize transportation and handling costs by reducing transfers between locations. In actual shortage situations, you may sometimes need to override DRP's "fair share" allocations, due to factors such as individual considerations or transportation constraints. DRP not only provides the starting point, it also gives you additional information so you can quickly and easily make informed decisions to optimally allocate the available inventory. Any quantity recommended for transfer between two locations is automatically decomposed into three components: the portion of the total quantity that is necessary to satisfy demand, the portion of the total quantity that is replenishing safety stock, and the portion of the total quantity that is not really needed at all except to satisfy order lot-size modifiers, such as minimum order quantity constraints or package sizes. Presenting information in this manner provides you with an excellent basis for making even more sophisticated allocation decisions. For example, when supply is scarce, you may choose to transfer available inventory only to locations that need it to satisfy demands, without regard for order size constraints. You also might choose to ignore locations which only need to replenish safety stock until sufficient stock is available to satisfy these needs. The Transfer Approval screen presents you with all of the information that is necessary to implement your decisions and take actions effectively and efficiently. DRP does all of the allocation "number crunching", freeing you to make quick, informed decisions and take immediate action to maximize customer service and maintain inventory at acceptable levels.

Shipment Planning
Once your distribution planner has determined what to order, DRP and the Load Building module helps plan the actual shipment of your replenishment orders. DRP's comprehensive Shipping Action report helps your traffic manager better plan and schedule the utilization of available transportation equipment. If your organization uses commercial carriers, you'll now have a shipping plan with which to negotiate more economical tariffs.

Access To All Recommended Transfers
The Shipping Action report shows all transfers between a source and the distribution locations by shipping route. This time-phased information enables you to identify situations in which you may want to pull shipments ahead when you can ship additional inventory at reduced cost. For example, all transfer quantities are grouped by priority within shipping route. Cumulative weight and cube information is displayed, not only for those items that must be shipped immediately, but also for those planned for shipment. This information enables you to pull shipments ahead so railcars and trailers can be used more economically. In many business environments, this can result in significant transportation savings.

Introducing Strategies Into The Planning Process

Managing your distribution network effectively means making strategic decisions. In addition to helping you manage the normal day-to-day distribution planning decisions, DRP offers you comprehensive decision support capabilities to help you make key management decisions. For example, the system lets you classify and group similar or high-demand products for better control. In addition, real-time simulation capabilities and automatic calculations make it easy to determine optimum replenishment quantities and safety stock, even when you face unexpected demands. PSI Software also recognizes that your management needs comprehensive, yet concise, performance evaluation capabilities. DRP provides the key performance indicators you need to assess the effectiveness of your distribution inventory strategies.

Inventory Stratification
DRP's flexible inventory stratification capabilities enable you to easily determine and assign priorities or classifications to items which make the most sense for your environment. You can define groups on the basis of nearly any criteria you desire. Stratification can be based on demand history, statistical forecast or adjusted forecast information. In addition, you can express ranking criteria in terms of units, cost, selling price, margin, weight or cube. Once a priority is assigned to an item, you can set policies that establish the level of control you desire in managing the service level and replenishment review of a group of products. For example, in many business environments a few items make up the majority of sales and occupy the majority of warehouse space. Under the traditional ABC inventory classification scheme, these items are referred to as Class A items. Another slightly larger number of Class B items makes up the remaining significant portion of sales and warehouse space usage, while a large number of Class C items have only a nominal impact. By determining and classifying which items belong in each group, you can set controls and implement policies which better leverage your resources and concentrate attention on the high-priority items.

Determining Safety Stock And Replenishment Quantities
Safety stock is "extra" inventory that is carried in order to satisfy demands that exceed forecast. Safety stock can help you significantly improve service, but it also can become costly if not properly managed. DRP gives you several options for prescribing safety stock values. One way is to allow DRP to automatically determine the values that are consistent with your specified service objectives. To calculate a safety stock value, DRP considers your desired service level, forecast error information provided by DF and the magnitude of the replenishment quantity. For organizations that want to use other safety stock options, DRP provides the flexibility to express safety stock values by specified periods of supply, specified number of units and safety time. In addition, you can specify minimum and maximum periods of safety stock supply. You also have the flexibility to instruct the system to allow safety stock to influence or not influence replenishment as an immediate requirement. For organizations that require safety stock allocations based on a national level, DRP can compute a national safety stock amount. This amount can be set aside for management of one facility or can be allocated on a percentage basis to multiple warehouse locations. As with safety stock values, there are also ways in which you can prescribe replenishment quantity values. One way is to allow DRP to compute a value. This value trades off the annual cost of ordering with the annual cost of carrying inventory, based on the annual demand at cost. This approach is like a traditional economic order quantity, but is much more dynamic. The replenishment amount is expressed in terms of periods of supply rather than units, which allows the number of units ordered to vary depending on seasonal characteristics and the requirements of subordinate distribution locations. For example, just prior to the peak of the season, three periods of supply may be three hundred units. However, after the peak of the season, three periods of supply may only be 40 units. This approach not only minimizes your exposure, it can also significantly reduce overstock. Other alternate replenishment quantity rules include specified periods of supply, specified number of units and lot for lot. Order quantities also can be based on lot sizes that are consistent with manufacturing's minimum and incremental lots.

Real-Time Simulation

DRP's Replenishment Quantity Safety Stock Detail screen helps you quickly and easily establish the optimum safety stock and replenishment quantity values for your products. Using this screen, you can simulate the impact of various replenishment scenarios, real-time. For example, you can immediately determine the impact on replenishment quantity attributable to increasing ordering cost or inventory carrying cost. You also can modify the desired service level, forecast error and replenishment quantities to recalculate required safety stock whenever you wish. For instance, if you want to increase your service level, you can immediately determine the cost of carrying the incremental safety stock. When you are satisfied with your simulation results, you can update the product's ordering cost, carrying cost, replenishment quantity, safety stock and desired service level on-line, real-time. DRP's powerful "what if?" simulation capabilities can help you prevent costly mistakes.

Evaluating Your Distribution Strategies And Performance

Management must constantly evaluate the performance of both its distribution resource planning strategies and the resulting distribution replenishment plans not only to identify strengths and weaknesses such as imbalances, understocks and overstocks within the distribution network, but also to determine both the short-term remedies and the alternative strategies, policies and controls to address underlying causes. For example, inventory projection evaluations can help you identify inventory that may need to be redistributed, reworked, repriced or even committed to obsolescence. DRP gives you informative screens and reports that make it easy to analyze both current and projected replenishment plan performance. For example, these screens display key inventory statistics such as projected investment, projected inventory turnover, projected service and the amount of inventory designated as overstocked. You also can view performance information at many different levels of summarization, including: Product line within product group within location, Product group within location, Location total, Product, Product line within product group, Product group, and Grand total. DRP's inventory projection reporting continuously evaluates the system's own effectiveness, as well as the effectiveness of actions taken by planners as a result of the system's recommendations. When actions are not logically related to recommendations, the system's performance reporting alerts you to the possibility of an undesirable plan. Since projection summaries are available both on-line and in hardcopy format, you can quickly identify areas of the organization that are not meeting established goals and objectives, and easily determine the necessary corrective action. DRP's comprehensive projection summaries provide key measures that enhance management control throughout your organization. For example, materials personnel can review safety stock levels and obsolete inventory potential. Financial management personnel can use performance reporting to determine inventory investment requirements, project obsolescence costs and improve cash flow management. Distribution can review the performance of individual locations to determine if specific service and inventory objectives are being met. DRP gives you the information and capabilities you need to both evaluate and improve the effectiveness of your entire organization's distribution resource planning activities and strategies.

A Powerful Sales And Operations Planning Tool

Proactive production planning and scheduling requires a reliable projection of distribution inventory needs. DRP generates the inventory replenishment plans for each item at each location so manufacturing and purchasing can schedule replenishment requirements. Better communication and consistent planning between manufacturing and distribution cannot only reduce distribution and production costs, it also can improve your organization's ability to meet its service objectives. This combination can significantly impact your company's competitive edge.

Load Building

The Load Building system makes it easy for you to build loads from a source of supply to one or more destinations. The system allows you to simultaneously consider four constraints during the process of building a load: the system supplied defaults include units (cases), cube, weight, and containers (pallets). When transportation or storage capacity is at a premium, the system helps you make sure that you're shipping the highest priority products first. It helps you build loads from your sources of supply to your distribution facilities; or from your facilities directly to your customers. The Load Building system considers trailers, railcars, or any other mode of transportation that you use. You can build full loads of nothing but the same product; or loads with multiple products; you can specify one destination; or multiple destinations, including a mix of distribution facilities and customers.

You must provide two major inputs to the Load Building system. The Deploy From file, which you may also think of as the supply file, contains information about the availability (when and how much) of each product at each source of supply. Your inventory control system, or your master production scheduling system, or your purchasing system typically provides this information to the Deploy From file. The Deploy To file, which you may also think of as the demand file, contains information about the needs (when and how much) of each destination or deploy to location including those of customers. Your inventory replenishment planning system usually supplies this information to the Deploy To file. Distribution Resource Planning (DRP) is a particularly good source for this information.

The Load Building system generates one major output file. The Approved Shipments file contains information about loads that have been built by a planner and designated as approved for shipment. This information is typically provided to your existing inventory control system, order processing system, or warehouse management system. Then, whichever system is applicable can initiate the physical transfer of inventory from one of your locations to another or from one of your locations to a customer.