APICS Operations Management Body of Knowledge Framework, Third Edition

5.7 Distribution requirements planning (DRP)

DRP determines the need to replenish inventory at branch warehouses. A time-phased order point approach is used where the planned orders at the branch warehouse level are exploded via material requirements planning logic to become gross requirements on the supplying source. The extension of DRP into the planning of key resources contained in a distribution system is called DRP II

5.7.1 Distribution inventories/independent demand

Distribution inventories, including finished goods and spare parts, involve items that customers might order. These inventories are either warehoused or in transit to customers. Distribution inventory management is important to supply chain management because of the global sourcing of parts and products. As more global sourcing is employed, transportation lead times increase and, consequently, inventory levels increase.

Independent demand is demand coming directly from the customer. Dependent demand, in contrast, is demand coming from a higher level in the bill of material. Independent demand is typically forecasted, while dependent demand is typically calculated. (See section 5.2.)

Independent demand drives the need for distribution inventory because customers want products or services when the need arises instead of waiting for inventory to be produced and moved through the entire supply chain. Independent demand primarily is associated with end user demand in supply chains. However, independent demand techniques and models also are used in manufacturing in several applications, including seasonal ordering, as ordering conventions with material requirements planning, and other variable demand processes.