I nt M ementnve ory anagDistribution Requirements PlanningLecture 11ESD 260 Fall 2003.C liceap© Chris Capli2 Assumptions: Basic DRP Model Demand Constant vs Variable Known vs Random Continuous vs Discrete Lead time Instantaneous Constant or Variable Independent Correlated Indentured Review Time Continuous Number of Echelons One vs Many Capacity / Resources Unlimited vs Limited Discounts None Excess Demand None All orders are backordered Lost orders Substitution Perishability None Uniform with time Planning Horizon Single Period Finite Period Infinite Number of Items One Many ce, MIT MIT Center for Transportation & Logistics – ESD.260 (deterministic/stochastic) Dependence of items vs Periodic All Units or Incremental© Chris Capli3 A Multi-Echelon Inventory System LDC1 LDC2 LDC4LDC3 R4R2 R3R1 R7 R8R6R5 RDC2RDC1 Plant ce, MIT MIT Center for Transportation & Logistics – ESD.260© Chris Capli4 In multi-echelon inventory systems with decentralized control, lot size / reorder point logic will: Create and amplify "lumpy" demand Lead to the mal-distribution of available stock, hoarding of stock, and unnecessary stock outs Force reliance on large safety stocks, expediting, and re-distribution. What if I Use Traditional Techniques? ce, MIT MIT Center for Transportation & Logistics – ESD.260© Chris Capli5 Impact of Multi-Echelons Customer Demand Patterns RDC OrderingPatterns RDC InventoryCycles CDC Demand Pattern Layers of Inventory Create Lumpy Demand ce, MIT MIT Center for Transportation & Logistics – ESD.260© Chris Capli6 What does a DRP do? Premises Inventory control in a distribution environment Multi-echelon distribution network Layers of inventory create "lumpy" demand Concepts Dependent demand versus independent demand Requirements calculation versus demand forecasting Information replaces inventory "DRP is simply the applicationof the MRP principles and techniquesto distribution inventories“ Andre Martin ce, MIT MIT Center for Transportation & Logistics – ESD.260 Many products, many stockage locations Schedule flow versus stockpile assets© Chris Capli7 DRP Requirements Information Requirements: Base Level Usage Forecasts Distribution Network Design Inventory Status Ordering Data DRP Process: Requirements Implosion Net from Gross Requirements Requirements Time Phasing Planned Order Release ce, MIT MIT Center for Transportation & Logistics – ESD.260A Distribution Network Example lPlant Regional Warehouse 1 Regional Warehouse 2 Regional Warehouse 3 Centra Warehouse Retailer A Retailer D Retailer G Retailer B Retailer E Retailer H Retailer C Retailer E Retailer I MIT Center for Transportation & Logistics – ESD.260 © Chris Caplice, MIT 8© Chris Capli9 Example: The DRP Plan 1 2 3 4 5 6 7 8 Period Usage 25 25 25 25 25 25 25 25 Gross Rqmt 40 40 40 40 40 40 40 40 i0 0 0 0 0 0 0 0 Net Rqmt 15 15 15 15 Plan Rcpt 0 0 50 0 0 50 Regional Warehouse One Q=50 , SS=15 , LT=1 ce, MIT MIT Center for Transportation & Logistics – ESD.260 NOW Begn Inv 50 25 50 25 50 25 50 25 Sched Rcpt 50 50 End Inv 50 25 50 25 50 25 50 25 50 POR 50 50 50 50© Chris Capli10 1 2 3 4 5 6 7 8 20 50 0 0 20 50 0 0 50 30 50 0 0 0 0 0 0 0 0 - - - - - -0 0 0 0 0 50 30 50 1 2 3 4 5 6 7 8 25 25 25 25 40 40 40 40 50 25 50 250 0 0 0 0 0 0 0 - - - -0 50 0 0 50 0 50 25 50 25 50 50 50 l1 2 3 4 5 6 7 8 10 10 10 20 20 30 30 30 20 10 30 20 0 0 0 0 0 0 0 0 - - - -30 0 0 30 0 20 10 30 20 30 30 30 30 1 2 3 4 5 6 7 8 5 15 10 0 15 0 20 10 10 25 15 10 15 150 0 0 0 0 0 0 0 - 5 - - - 5 0 20 20 0 0 20 0 15 10 15 25 20 The DRP Plan ilRetailRetaillilililiililil I llPlant ce, MIT MIT Center for Transportation & Logistics – ESD.260 Central Warehouse Facility Q=200, SS=0, LT=2 NOW Period Usage 100 30 100 100 Gross Rqmt 100 30 100 100 Begin Inv 150 180 150 50 150 Sched Recpt Net Rqmt 20 50 Planned Recpt 200 200 End Inv 150 180 150 50 150 150 Planned Order 200 200 Regional Warehouse One Q=50, SS=15, LT=1 NOW Period Usage 25 25 25 25 Gross Rqmt 40 40 40 40Begin Inv 25 50 50 25 Sched Recpt Net Rqmt 15 15 15 15 Planned Recpt 50 50 End Inv 50 25 25 50 Planned Order 50 50 Regiona Warehouse Two Q=30, SS=10, LT=1 NOW Period Usage 10 20 20 20 Gross Rqmt 20 20 20 30Begin Inv 20 10 30 10 Sched Recpt Net Rqmt 10 20 10 20 Planned Recpt 30 30 End Inv 10 20 10 20 Planned Order 30Regional Warehouse Three Q=20, SS=10, LT=1 NOW Period Usage 10 15 Gross Rqmt 15 25 20 25Begin Inv 25 15 20 20 Sched Recpt Net Rqmt 15 10 Planned Recpt 20 End Inv 15 15 20 25 Reta er A er B er C Regiona Warehouse 1 Reta er D Reta er E Reta er E Reg onal Warehouse 2 Reta er G Reta er H Reta erRegiona Warehouse 3 Centra Warehouse© Chris Capli11 Example: The DRP Plan Regional Warehouse Two Q=30 , SS=10 , LT=1 NOW 1 2 3 4 5 6 7 8 Period Usage 10 10 10 10 20 20 20 20 20 20 20 20 30 30 30 30 Begin Inv 20 10 30 20 10 20 30 10 0 0 0 0 0 0 0 0 Net Rqmt 10 20 10 20 Plan Rcpt 0 30 0 0 30 30 0 30 End Inv 20 10 30 20 10 20 30 10 20 POR 30 30 30 30 ce, MIT MIT Center for Transportation & Logistics – ESD.260 Gross Rqmt Sched Rcpt© Chris Capli12 Example: The DRP Plan Regional Warehouse Three Q=20 , SS=10 , LT=1 1 2 3 4 5 6 7 8 Period Usage 5 0 15 0 Gross Rqmt 15 25 20 20 10 25 10 25 i0 0 0 0 0 0 0 0 Net Rqmt 15 5 5 Pl 0 0 0 0 POR ce, MIT MIT Center for Transportation & Logistics – ESD.260 NOW 15 10 10 15 Begn Inv 15 10 15 25 15 15 20 20 Sched Rcpt 10 an Rcpt 20 20 20 20 End Inv 15 10 15 25 15 15 20 20 25 20 20 20 20The DRP Plan for All Locations Rolling Up Orders NOW 1 2 3 4 5 6 7 8 CENTRAL Period Usage 100 20 50 30 100 0 100 0 POR 200 200 REGION ONE Period Usage 25 25 25 25 25 25 25 25 POR 50 50 50 50 REGION TWO Period Usage 10 10 10 10 20 20 20 20 POR 30 30 …
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