Week 8_DTM_CH9_Replineshment in a Multi-echelon Channel Environment

PART III: INVENTORY MANAGEMENT IN THE
SUPPLY CHAIN ENVIRONMENT
Replenishment in A Multi-echelon
Channel Environment (Ch. 9)
Distribution and Transportation Management Friday 21 October 2016
21 October 2016, BSc – IBN
Didik Siswantoyo, BSc Fin., MSc IFM
Lecturer in Financial Management,
Distribution and Transportation Management

Objectives
§  Review of how multi-echelon distribution demand and supply inventories are
managed
§  Understand the channel “push” and “pull” methods of replenishment
management.
§  Describe the application of statistical replenishment in a multi-echelon channel.
§  Focus on the theory and processing logic of Distribution Required Planning.
§  Analyse how DRP uses time-phased demand and supply input to generate
output information that is used by the inventory planner to guide resupply order
action.
§  Discuss the impact of the DRP priority plan on financial capital planning,
transportation capacity requirements, warehouse space requirements, and
labour and equipment capabilities.
2Distribution and Transportation Management (Ch. 9) Friday 21 October 2016

Timetable for 21 October 2016
§  13.00 – 13.20 : Distribution Channel Basics & The Basic
of Distribution Required
§  13.20 – 13.50 : Planning Distribution Required Planning
(DRP) and DRP Calculation
§  14.00 – 15.00 : DRP in Multi-echelon Environment,
Stocking Multi-echelon Supply Channels
and Supply Chain Capacity Planning

Contents (1/2)
§  Distribution Channel Basics
–  Coupled Deployment (Push) and Independent Deployment (Pull)
Systems
–  Which to choose: Order Points or Distribution Required Planning
(DRP)
§ The Basics of DRP
–  Intro. to the DRP Grid, DRP Order Policies and Safety Stock
§ The DRP Calculation
–  Basic Data Elements, Bucketless DRP, and
–  DRP Regeneration Frequency
§ DRP in Multi-echelon Environment
–  DRP Planning Process

Contents (2/2)
§ Stocking Multi-echelon Supply Channels
–  Bullwhip Effect
–  Adjusting Channel Imbalance
§ Supply Chain Capacity Planning
–  Financial Estimating
–  Transportation Planning
§  Summing up

Distribution Channel Basics
§ Product and Information Flows
6Distribution and Transportation Management (Ch. 3)
Source: Ross (2015)
Fig. 1: Distribution Channel Flows
9
Friday 21 October 2016

§ Coupled and Independent Deployment Systems 1/3
Source: Ross (2015)
Fig. 2: Push and Pull Systems

Source: Ross (2015)
Fig. 3: Coupled Deployment “Push” System
The Key Success factor
in the Push System

Source: Ross (2015)
Fig. 3: EXAMPLE of Coupled Deployment “Push” System
Inventory Planners
quantify the total amount
of goods to be distributed

Table 2: Allocation sample of Coupled Deployment “Push” System

Table 3: Advantages of Push System (1/2)
Performance
Measurement
Enables corporate planners to leverage the total inventory & historical demand to meet
shipment goals while minimizing the cost.
The measurement is dependent on how well the whole channel is meeting corporate
sales and asset management targets.
Central Planning Can create a single inventory plan for the ongoing ordering and deployment of channel
inventory.
Can determine global channel inventories and remove the normal supply point stock
redundancies caused by inaccuracies in local replenishment decision making.
Cost Reductions By centralizing inventory planning and deployment, companies can reduce the total
working capital necessary to stock the supply channel.
operating costs are reduced by economies attained in transportation and purchasing.
Safety Stock Control is a characteristic feature of inventories subject to independent demand, a “push”
system enables planners to centralize safety stocks at the central facility.
By eliminating unnecessary safety stocks carried at each channel location, “push”
systems reduce total inventory costs while maintaining high channel serviceability.

Table 4: Drawbacks of Push System (2/2)
Performance
Measurement
branch management’s role migrates from a focus on detailed inventory replenishment
management to ensuring transmission of accurate stock status and sales usage
information to the channel’s central planning functions.
Central Planning requires a professionally trained central planning staff that can work with aggregate
data and demand forecasting techniques.
Cost Reductions requires changes in operational roles.
Safety Stock Control inventory accuracy and timely transaction record posting normally requires a computer
system that combines the historical demand resident at each channel location
Source: Siswantoyo based upon Ross, 2015

Independent Deployment “ Pull “ Systems (1/5)
§  How does the Pull System Flow works?
13Distribution and Transportation Management (Ch.9)
Source: Ross (2015)
Fig. 4: Pull System Flow

§  Each facility in the distribution channel is responsible for inventory reordering
based on demand requirements, determining the replenishment and then
ordering the requested products from the supplying location.
§  The branch warehouse specifies the order timing, nature of items to be ordered,
quantify the resupply orders and consignment demands.
§  Distribution centers (DCs) receive a sequence of resupply orders by due date
from their branches and attempt to fill and ship them according to some priority
rule, usually first-come first-serve.
§  Facilities have a choice of selecting either statistical order point or
distribution requirements planning (DRP) or a combination of both as their
ordering system.
§  Normally, executing a pull system requires the presence of an enterprise
resources planning (ERP) system shared by all facilities in the channel network
§  Finally, the DC acquires its replenishment inventory directly from the
manufacturer or the supplier.

Fig. 5: Example of how the Pull System Flow works
Source: Ross (2015)
Fig. 4: Pull System Flow
12
3

Table 5: Advantages of Pull System
Planning Simplicity The systems are easy to operate because each facility is responsible for inventory
planning
No centralize planning DC is needed, No process of aggregating demand and
developing allocation plans are needed.
Turnover The inventory costs at the warehouse level will decline, because they only bear the
right amount of products based upon the demand.
Less risky because it turn the inventory faster than in the push system.
Overhead Cost
Reduction
is a characteristic feature of inventories subject to independent demand, a “push”
system enables planners to centralize safety stocks at the central facility.
Use of
Replenishment and
DRP Ordering
Methods
Reorder Point (ROP) and DRP computer system logic provide excellent tools to
operate pull systems, because both systems enable local warehouse to determine the
actual timing and quantities of replenishment orders.
This methods connect the correlated facilities when the resupply orders arrive through
bill of distribution (BOD)

Table 6: Drawback of Pull System
Possibly safety stock at multiple echelons in the channel, because each location in the
network is responsible for their own service levels
overall inventory carrying costs and deficiencies in information flows, particularly in a supply
chain driven by statistical replenishment techniques.
Supplying warehouses are usually unaware of branch requirements until the resupply order
arrives.

How to Deal With the Deficiency of Pull Systems? (1/2)
§  Periodic Review System
Operationally, branch warehouse inventories are reviewed periodically and
resupply orders generated with sufficient quantities necessary to restore
channel-wide stocks to a targeted level.
§  Double Reorder Point
Each branch’s inventory has its reorder point set by calculating the normal
reorder point plus the average demand during the central warehouse’s
procurement, transportation, and production lead time.
§  Base Stock System
Requires each location in the channel to maintain a base level of inventory
determined as the facility’s statistically computed demand plus stock at all
upstream warehouses.
The inventory position (IP) at each level is indicated by the following formula:
IP = ES + RO
Where, IP = Inventory Position, ES = Echelon Stock, RO = Replenishment Order

How to Deal With the Pull Systems Deficiency? (2/2)
§ Base Stock System
For example:
Branch facility A is resupplied from warehouse 1. For a given item,
branch facility A stocks 100 units and warehouse 1 stocks 300 units.
There are also 50 units in transit to branch facility A, and warehouse 1
has an unfilled replenishment order from the supplier for 100 units.
Finally, branch facility A has a customer order backlog of 125 units.
Then, warehouse 1’s inventory position is:
IP = ES + RO
IP = (100 + 300 + 50 - 125) + 100
IP = 425 units

Which one to Chose: Reorder Point or DRP?
§ Depending on how inventory moves through the multi-echelon
channel and the level of control required by management.
2.1. Finished goods are purchased from suppliers and then transported
through the various channel echelons until they reach the end-use customer.
2.2. Items originate at an internal company production plant.
ROP or DRP
1. the length and
homogeneity of the lead
time
2. how items enter the
supply chain

ROP Mechanics in a Multi-echelon Supply Channel
Fig. 6: Purchased Finished Good
Source: Ross (2015)

How does the ROP works in a multi-echelon
environment?
Fig. 7: ROP Channel Management
Source: Ross (2015)
Supply Facilities
(i.e. W1, W2,
W3)
Regional
Supply Facility
ROP is best suited for goods that are not self-manufactured by the
firm. It focuses only on short lead-time reorder points.

DRP Mechanics in a Multi-echelon Supply Channel (1/3)
§ Distribution Requirements Planning (DRP)
•  Used if the finished goods are supplied from production plants or made-to-
order products supplied by the suppliers, exclusively for long-lead time
items.
§ How to manage a complex circumstance under DRP?
•  Production planners often must manage significant processing and
purchasing lead times before finished goods are made and shipped through
the supply channel.
•  Production planners uses the material requirements planning (MRP) system
to purchase the components and make the products (the cumulative lead
time) and to offset the lead-time.
23Distribution and Transportation Management (Ch.9) Friday 21 October 2016

Fig 8: DRP Manufactured Finished Product Flow
Source: Ross (2015)

Source: Ross (2015)
§  Planners employ the DRP by means of using the time-phased order point
(TPOP) to meet the plan of supply and demand requirements
Table 7: DRP Manufactured Finished Product Flow

The Basic Concepts of DRP (1/5)
Table 8: Concepts of DRP Grip
1. Time Periods Inventory based on Daily, Weekly, and/or Monthly.
2. Gross Requirements (GR) Define the total demand placed on an item, literally based on forecasts
3. DRP in Transit Receipts
(TR)
Define the total quantity of released replenishment orders for an item
due within a specific time period.
4. Projected Available Balance
(PAB)
provides the planner visibility to current and projected on-hand
quantities in all periods constituting the planning horizon.
PAB = (IBn-1 + TRn) – GRn
5. Net Requirements It indicates in which time periods the gross requirements (demand)
exceed the available inventory supply (i.e. result has to be negative).
6. DRP Planned Order Receipt The order is considered as “planned” because it has not been released
into an actual order and placed at the supply source.
7. DRP Planned Order Release The date a DRP planned order is to be released is calculated by
subtracting the item’s replenishment lead time from the planned
order receipt date.
§  The DRP time-phased format is designed to assist the inventory planner to visualize the
interaction between supply and demand as they appear in the planning horizon.

Source: Ross (2015)
§ Table 9: PAB Calculation
PAB = (IBn-1 + TRn) – GRn

Source: Ross (2015)
§ Table 10: Net Requirement Calculation
NRn = PABn

Source: Ross (2015)
§ Table 11: DRP Planned Order Receipt
DRP POR = PAB + NR

Source: Ross (2015)
§ Table 12: DRP Planned Order Release

DRP Order Policies and Safety Stock
§  The Implementation of order policies is to compute the order lot size based upon
the requirements. And the most common policies in the DRP System are:
§  Discrete (lot-for-lot). This order policy recommends a resupply quantity that matches
exactly each item’s net requirements by due date.
§  Fixed period requirements. In this technique, the system calculates the replenishment
quantity based on a simple rule of ordering n period’s supply.
§  Discrete above the standard lot size. Often an item is resupplied in quantities of a
certain lot size because of discounting, minimum quantity lot sizes, or shipping purposes. This
order policy requires the user to set the required lot-size quantity in the item’s master record.
§  Incremental above the standard lot size. This order policy is based on two values
entered in the item master record: the lot size and an incremental quantity that is added to the lot
size when the net requirement is greater than the lot size.
§  Multiples of a standard lot size. When using this order policy, the system will attempt to
satisfy the net requirement with the item’s replenishment lot size
§  Min/max order quantity. Requirements occur during the DRP planned order generation
for an item with a min/max order policy, the suggested DRP planned resupply order cannot be less
than the preset minimum nor greater than the preset maximum.
§  Lot costing models. The final order policy model is based on some form of lot size that, like
the EOQ, seeks to minimize the sum of inventory carrying costs.

Safety Stock (1/5)
§  The use of safety stock plays an important role in distribution inventory planning.
§  Based on APICS dictionary, Safety Stock defines as “a quantity of stock planned
to be in inventory to protect against fluctuations in demand or supply.”
§  Safety stock acts as a buffer to probabilistic variability, decoupling demand from
stocked inventories thereby sheltering inventory from the threat of stock out.
§  The safety stock quantity is normally based on a company decision to support a
targeted customer service percentage. The higher the targeted service
percentage, the higher the safety stock.

Safety Stock (2/5
§ Exercise: DRP Without Safety Stock
Item K-2000-10 is replenished through DRP. The item takes 3 days to be delivered from the supplying
distribution center. The order quantity is in lot sizes of 200 units. There is an opening balance of 275
units on hand. Demand occurs in the form of gross requirements through the planning horizon.
When the DRP computer processor is run, the following results are evident in the DRP grid detailed:
Source: Ross (2015)
Table13: DRP Without Safety Stock Recalculation

Safety Stock (3/5)
§ Exercise: DRP Safety Stock Violation
The projected available balance (PAB) in periods 3, 4, 7, and 10 have ending balances that fall below the
75 safety stock units and clearly constitute a safety stock violation.
Source: Ross (2015)
Table 14: DRP Safety Stock Violation

Safety Stock (4/5)
§  How to eliminate the Safety Stock violations along the Period?
ª  Add the safety stock into the DRP calculation, then DRP will generate the initiated
quantity sufficiently.
Source: Ross (2015)
Table 15: DRP Safety Stock Recalculation
PABn = (IBn-1 + TRn +PORn) - GRn

The DRP Calculation
§  The generation of planned orders to cover all future item net requirements is the
cornerstone of the DRP planning process.
§  The calculation is based upon the following basic data elements:
1.  The DRP process is generated by using the data input from the following sources:
2.  Length of the planning horizon
3.  Size of the planning buckets
4.  Item forecasts by due date
5.  Open customer orders by item by due date
6.  Beginning on-hand quantities by item
7.  Open purchase, interbranch, and postponement orders by item by due date
8.  Replenishment lead times by item
9.  Safety stock by item
10.  Order policy code by item
11.  Supply sources based on the bill of distribution (BOD)
§  Once the DRP calculation is complete, the inventory planners can obtain output
information (i.e. Exception reporting, Planned orders, Action messages and
Pegged requirements) which then utilised to guide resupply order action.

Bucketless DRP
§  The time bucket format is merely a convenient way to aggregate demand and supply data for
viewing purposes.
§  Most commercial DRP systems provide a bucketless display, permitting the planner to see the
orders in ascending or descending order by actual due dates and quantities along with a
running PAB total. Table 16: Bucketless DRP Display
Source: Ross (2015)

Source: Ross (2015)
Source: Ross (2015)

DRP in A Multi-echelon Environment
§  The channel consists of three distribution centres (DCs) that are supplied from a single production
plant. Item KL-2000-10 is produced at the production plant.
§  The three DCs pull the item from the production plant based on the DRP planned resupply order
generation.
§  This step could be performed by the planners at each DC or globally from a central location.
§  Replenishment orders are received only from the production plant.
§  The resulting DRP grids use the statement of customer orders and forecasts for the item to populate
the gross requirements row for each DC.
§  Resupply orders in the process of being shipped are visible in the DRP in transit receipts row
§  Finally, the DRP processor uses the replenishment order quantities, lead times, and current on hand
inventories to calculate the projected available inventory, net requirements, and planned order rows
for item KL-2000-10 at each DC.
§  The DRP planned orders from the DC are then placed by the DRP system directly into the gross
requirements of the “parent” production plant.

DRP Planning Process (1/3)
§  The objectives of DRP are the creation of an inventory replenishment plan that optimizes
targeted customer service levels while minimizing channel inventory costs.
§  In developing the DRP plan, inventory planners consider questions such as the following:
1.  Is the planning data for each DRP planned item accurate and up-to-date?
2.  Have BODs been created that accurately reflect the structure of the distribution channel?
3.  Are on-hand balances being updated accurately and on a timely basis?
4.  Are open customer and purchase order due dates and quantities accurate?
5.  Have replenishment order policies been accurately defined?
6.  Do product replenishment lead times reflect current delivery realities?
7.  Have safety stocks been calculated correctly?
8.  Have DRP regeneration and planning procedures been formalized?
§  The schedule of planned order releases defines the scope of replenishment order action
to be performed by the planner (see. Figure 10)

Source: Ross (2015)
Fig 9: DRP Planning Process

42Distribution and Transportation Management (Ch.9) Friday 21 October 2016
§  The schedule of planned order releases defines the scope of replenishment order action to be performed by
the planner.
§  Most commercial DRP systems provide online displays and output reports advising planners of required order
release and reschedule activities.
§  The final step in the DRP planning process is the calculation and review of the logistics capacities necessary to deliver
the schedule of resupply planned orders.
§  Logistics capacities are composed of four elements: inventory investment, transportation, warehouse space, and labor
and equipment.
Source: Ross (2015)
Table 17: DRP Order Action

Stocking Multi-echelon Supply channels
43Distribution ad Transportation Management (Ch.9)
§  An important problem facing planners is determining which items are to be stocked at each warehouse
and in what quantities.
§  Solving this basic multi- echelon problem is often perceived as consolidating inventories into fewer
stocking locations in order to reduce total inventory costs.
§  Bullwhip Effect
“An extreme change in the supply position upstream in a supply chain generated by a small change
in demand downstream in the supply chain.”
§  It occurs if a small variation in customer demand ripples back up the supply chain in
successively wider peaks and troughs, such as:
–  Lack of collaboration and information sharing:
–  Demand forecast updating: A critical feature of the bullwhip effect is the nature of the forecasts
generated in the channel.
–  Order batching
–  Price fluctuations and promotions
–  Rationing and shortage gaming

44Distribution and Transportation Management (Ch.9) Friday 21, October 2016

45Distribution and Transportation Management (Ch.9) Friday, 21 October 2016
§  How to Cope With Bullwhip Effect (Chopra and Meindl, 2007)?
1.  Aligning of channel goals and profitability
•  Achieving synchronization of goals and profitability requires channel members to develop strategies
that ensure profitability and risk are shared equally by all channel nodes
2.  Improved information accuracy
•  A variety of computerized applications provide planners with increased visibility to supply chain
disruptions and improve the accuracy of available information (e.g. point of sales, EDI, CPFR.)
3.  Improved operational performance
•  Reducing replenishment lead times and lot sizes will significantly assist in decreasing demand
uncertainty during the replenishment process (e.g. EDI, Cross-docking, etc.).
4.  Designing pricing strategies to stabilize orders
•  to move from lot-size to volume-based quantity discounts
•  to restrict or eliminate promotions and to establish standardized prices with the goal of linking prices
directly to customer sales
5.  Building strategic partnership and trust
•  action-oriented levers : includes information sharing, changing incentives, operational improvements,
and stabilizing of pricing
•  relationship-oriented levers : involves the construction of cooperation and trust within the supply chain
by detailing the benefits to each party, identifying operational roles and decision rights for each channel
member, establishing effective contracts, and designing effective conflict-resolution mechanisms.

Selective Stocking
§  What does selective stocking mean, is the objective of this method and
how to maximise the existing warehouse space, and finally how to
determine stocking levels?
–  A simple concept to stock channel locations.
–  To allow supply chain planners to maximise the available warehouse space in the
channel.
–  The maximisation can be done through determining which items are to be stocked at
what channel level based upon the items classification.
–  Supply channel planners are suggested to compute the trade-off costs of lowering
channel carrying costs towards increases to other logistics costs and customer
service.

The Square-Root Rule (1/3)
§  This technique assists planners to calculate the advantage gained
through a channel inventory consolidation strategy.
§ To decrease the total channel costs assuming that the greater the
number of channel locations, the greater will be the cost of inventory
needed to maintain targeted customer service levels.
§ Equation for Square-Root Rule, CI = SI √n
Where;
CI = Cost of Channel Inventory of an item if the entire network stock is
centralised at “ n “ number of stocking locations.
SI = The Amount of inventory stocked at “ n “ distribution locations
n = The number of stocking points in the channel.

How Does The Square-Root Rule Work? (2/3)
§  If a planner wanted to determine the cost of carrying an item in multiple channel distribution points.
§  The first step is to determine the total average inventory value for stocking the item in a single
warehouse.
§  The next step is calculating the square root of each additional location beyond one.
§  The final step is multiplying the square root value associated with a determined number of warehouses
by the base average inventory value of stocking the item in a single warehouse.

How Does The Square-Root Rule Work? (3/3)
§  The square-root law could be used to find the inverse of the above problem.
§  In the scenario, the distribution channel contains US$20,554.80 in inventory, stored in 10 facilities.
§  The goal is to find out what the total cost would be if the channel is reduced from 10 to 3 facilities
The square-root rule assumes several conditions if it is to provide meaningful data.
1.  Interbranch transfers rarely occur.
2.  The lead times do not vary and thus inbound transportation is not greatly impacted by
centralization.
3.  Customer service targets are constant regardless of the number of facilities.
4.  Customer demand at each facility is normally distributed.

Adjusting Channel Imbalances (1/3)
§  There are two conventional ways to cope with the imbalance of inventory
quantities:
1.  Least-Cost Redistribution: to restore channel imbalances at the least cost.
Price – Delivery Matrix
Delivery Cost Solution

2.  “Fair Share” Allocation : to provide branch locations with equal run-out replenishment
resupply that should be sufficient to prevent stock out during the lead time until supplier
receipts arrive at the warehouse.

2.  “Fair Share” Allocation : to provide branch locations with equal run-out replenishment
resupply that should be sufficient to prevent stock out during the lead time until supplier
receipts arrive at the warehouse.
DS = 200 + (30 + 37 + 33) : (8 + 10 + 12)
DS = 10 days
Ab = ((10 – (30/8)) x 8)
Ab = 50 units
The Drawback is that it does not consider differences in performance
cycle times, EOQs, or safety stock requirements, and is, therefore,
limited in its ability to manage multi-echelon channel systems.

Supply Chain Facility Planning
1.  Financial Estimating: to assist planners to provide sufficient capital to fund the
replenishment plan.
The advantage of using DRP in developing inventory asset planning asf:
1.  Ease of planning: DRP provides planners with projected costs over the planning horizon
by product family and by total warehouse.
2.  Accuracy: DRP provides planners with an accurate calculation of projected inventory
costs driven by estimated forecast demand. The more accurate the forecast, the more
accurate the financial projection.
3.  Simulation: By inputting alternate forecasts into the system, DRP provides planners with
the ability to simulate product level, individual warehouse, and aggregate channel costs
4.  Productivity: DRP permits planners to make the right inventory decisions so that targeted
customer service levels are met while reducing inventory costs.

Supply Chain Facility Planning
2.  Transportation Planning: To allow planners to control the transportation costs effectively
towards the uncertain future shipping requirements.
There are four key areas to be closely paid attention by planners:
1.  The transportation planner has the critical information necessary to schedule cost-
effective transportation and loading.
2.  Through the use of simulation, planners have the ability to see the effect of different
forecast plans and provide essential input into selecting the optimal forecast that
minimizes total transportation cost.
3.  The aggregate shipping schedule assists in planning other critical logistics components
(i.e. freight budgets, negotiate freight rates, and justify the acquisition of additional
equipment such as trucks, trailers, and rail, cars).
4.  The shipping plan represents what the firm is planning to ship. This information can be
used by other business functions, such as accounting and sales, in their planning
processes.

Sum-up (1/2)
§  Inventory management in a multi-echelon channel environment is determined by the
structure and objectives of a firm’s distribution channel.
§  There are basically two ways to replenish inventory in a distribution channel: push or pull.
§  The decision to choose one of the techniques depends on how inventory moves through the
channel and the level of control required by managers.
§  In a “push” system, all channel resupply activities are conducted by the supplying facilities.
Channel resupply is performed first by aggregating the demand requirements from all lower
echelon stocking points, forecasting methods applied, and then replenishment inventory is
pushed back down the channel using some form of allocation algorithm.
§  In a “pull” system each downstream facility maintains its own inventory system and
determines the timing and quantity of replenishment from designated upstream channel
supply points. When a “pull” system strategy is chosen, inventory managers can choose
from two possible techniques: reorder point (ROP) or distribution requirements planning
(DRP).
§  A ROP technique is mostly chosen by channels that only stock finished goods acquired from
outside suppliers.

Sum-up (2/2)
§  A key factor to note in the selection of the ROP technique is the relative shortness (expressed in
days) of the replenishment lead times separating each channel facility
§  The decision to use DRP is purely one of lead time. Unlike the short lead times characteristic of a
ROP supply channel, DRP is best used to manage the much longer production lead times
required by production plants at the beginning of the supply chain.
§  DRP works well with the time-phased manufacturing resources planning (MRP) systems used by
producers to plan inventories.
§  The DRP computer system retrieves key input from such data source files as forecast, open
customer order, open replenishment order, on-hand balance, supplier lead times, order policy
codes, and safety stock.
§  A significant advantage of DRP is also found in the ability of planners to use the DRP output to
maintain the balance between demand requirements and supply chain resource capacities.
§  Distribution planners can use the DRP-generated schedule to identify and remove capacity
constraints in channel inventory deployment by providing visibility to possible constraints in
capital, the work force, equipment, and space availability.
§  Achieving these goals requires that supply chain planners possess information systems that
provide a schedule of priority requirements that are translated quickly and accurately into detailed
capacity planning elements.

That was Replenishment in a Multi-echelon
Channel Environment (Ch. 9)
See you again next week!

Week 8_DTM_CH9_Replineshment in a Multi-echelon Channel Environment

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