Distribution Requirements Planning (DRP)

DRP applies the logic of material requirements planning (MRP) to a distribution network: the network structure plays the role of the bill of materials, and transit times replace production lead times. Only the outermost locations need a forecast. Demand at the DC is dependent – it is the sum of its branches' planned orders, not a separate forecast of its own outbound shipments. One step for a DC serving three branches with a one‑week transit time:

• Branch planned receipts in week 5 – 400 + 250 + 350 = 1,000 units, each already netted against branch stock, stock in transit and safety stock.
• DC gross requirement in week 4 – 1,000 units, shifted back by the one‑week transit time.
• DC planned order – 1,000 − 300 on hand − 0 in scheduled receipts = 700 units, rounded up to full pallets or the supplier's minimum order quantity (MOQ) and released earlier by the supplier lead time.

DRP in practice

The DC plan is only as long as the branch plans that feed it. If branches calculate planned orders one or two weeks ahead but the supplier to the DC needs six weeks, the DC has no time‑phased requirements for most of the period it is ordering for, and the gap gets filled by extrapolating its own shipment history. Where branches order in full cases or pallets on fixed delivery days, that history swings more than consumer demand does, and a forecast built on it brings the bullwhip effect back into a method meant to remove it. The branch planning horizon therefore has to cover the cumulative lead time back to the supplier, even if the far weeks only roll up forecast and never turn into shipments.

The second decision is where the buffer sits. If every branch holds safety stock for its own forecast error and the DC adds its own on top of the summed requirements, the network carries more stock than the combined uncertainty justifies: branch errors partly cancel out when they are added up at the DC, as long as they do not share the same cause. When the DC runs short, DRP shows the conflict early, because branch requirements for the coming weeks exceed what the DC will have. It does not decide which branch gets the stock; that is an allocation rule.

Logio designs network structures, stock locations and replenishment flows in distribution network optimization projects. Veritico STOCK forecasts demand per item, store or warehouse and day, calculates store replenishment and warehouse replenishment and supplier orders under logistics constraints such as MOQ, minimum order value and pack sizes, and in a network of a central warehouse and branches assigns part of the safety stock to the central warehouse. When stock is short, it allocates it across the network as one pool according to target service levels.

Related terms

• Material Requirements Planning (MRP)
• Replenishment
• Bullwhip Effect
• Allocation