What is Distribution Requirements Planning?

Distribution Requirements Planning (DRP) is a time-phased, logic-driven approach to managing inventory across a multi-echelon distribution network. At its core, DRP translates forecasted and actual customer demand into replenishment requirements at distribution centers, warehouses, and retail locations, ensuring the right products arrive at the right place and time. By combining historical sales data, lead times, safety stock parameters, and order policies, DRP helps distributors minimize stockouts, reduce carrying costs, and make informed decisions about transfers, purchase orders, and production schedules.

Today’s Softengine blog explores the fundamentals of DRP, its benefits, implementation best practices, and how Acumatica’s Distribution Management product leverages advanced DRP functionality to empower distributors.

Introduction to Distribution Requirements Planning

Definition of DRP

Distribution Requirements Planning (DRP) is a systematic process to determine which goods, in what quantities, and when they are needed at various distribution points to meet anticipated customer demand while minimizing shortages and excess inventory.. Also referred to as distribution replenishment planning, DRP uses a time-phased approach to project inventory depletion dates and plan replenishment orders, reducing the costs of ordering, transporting, and holding stock.

Origins and Evolution of DRP

DRP emerged in the late 1980s as an extension of Material Requirements Planning (MRP), applying MRP principles to the distribution side of the supply chain. While MRP focuses on planning raw materials and components for manufacturing, DRP “explodes” customer demand upstream through multiple distribution levels, from retail outlets to regional warehouses, ensuring alignment between end-customer requirements and supplier production schedules. As computer processing power and integrated ERP systems advanced, DRP evolved from manual spreadsheets to sophisticated, real-time planning modules.

How DRP Works

Time-Phased Forecasting and Planning

At the heart of DRP is a rolling, time-phased forecast that projects customer demand over future periods (weekly, monthly, or yearly). This forecast can be generated automatically based on historical sales data, manually entered by planners, or a hybrid of both. The system then calculates projected available balances (PAB), net requirements (forecast plus safety stock minus on-hand inventory), and planned order receipts/releases for each inventory item at every distribution node.

DRP Logic: Exploding Demand and Gross Requirements

DRP employs a “pull” logic similar to MRP’s explosion of the bill of materials, but instead uses a Bill of Distribution (BOD) to propagate demand upstream. When projected demand at a lower echelon exceeds available supply, DRP generates planned orders to the supplying warehouse or vendor. These planned orders become gross requirements for the supplying node, which in turn may trigger further upstream orders, ensuring a coordinated replenishment plan across the network.

Benefits of DRP for Distributors

Optimal Inventory Levels

By time-phasing replenishment orders based on accurate demand forecasts and lead times, DRP helps distributors maintain optimal inventory levels, enough to satisfy demand without overstocking. This balance reduces carrying costs associated with storage, insurance, and obsolescence.

Reduced Stockouts and Overstocks

DRP’s proactive planning minimizes stockouts by forecasting shortages before they occur, and it prevents overstocks by aligning orders with actual demand signals. Distributors gain confidence that inventory will be available where needed, boosting service levels and customer satisfaction.

Improved Supply Chain Visibility

DRP provides a holistic view of inventory requirements across all distribution nodes, enabling planners to see the ripple effects of demand changes, supplier delays, or promotional spikes. Enhanced visibility fosters collaboration among sales, operations, and logistics teams, leading to faster, more informed decision-making.

Lower Total Supply Chain Costs

By optimizing order quantities, timing, and warehouse transfers, DRP reduces ordering, transportation, and handling costs. Coordinated replenishment decreases rush orders, freight premiums, and emergency shipments, positively impacting the bottom line.

Key Components of a DRP System

Demand Forecasts

Accurate demand forecasts whether statistical or judgmental, are the foundation of effective DRP. Forecasts drive calculations for gross and net requirements and inform safety stock settings.

Lead Times and Replenishment Rules

DRP requires precise lead time definitions for vendor orders, inter-warehouse transfers, and production runs. Planners can configure replenishment rules such as minimum/maximum order quantities, lot sizing, and grace periods (days after receipt considered as meeting demand) to fine-tune plans. 

Safety Stock and Order Quantities

Safety stock buffers protect against forecast errors and demand variability. DRP uses safety stock levels and reorder points in conjunction with forecasted demand to suggest planned orders, smoothing order quantities by defined lot multiples for efficient procurement and production.

Master Data Accuracy

High-quality master data, item definitions, warehouse locations, vendor information, and demand history, is crucial. Inaccurate data leads to misguided DRP outputs and undermines trust in the planning process.

DRP vs. MRP: Understanding the Differences

While both DRP and MRP use time-phased explosion logic, their scopes differ:

• MRP focuses on planning materials and components for manufacturing based on production schedules.
• DRP centers on planning finished goods distribution across a network of warehouses and distribution centers.

DRP “pulls” demand through distribution nodes using a Bill of Distribution, whereas MRP “pushes” requirements through the production process via a Bill of Materials. Additionally, DRP often deals with multi-echelon networks and incorporates warehouse transfer orders, while MRP emphasizes shop floor control and component replenishment.

Implementing DRP: Best Practices

Ensure Data Integrity

Begin with a data cleansing initiative to verify item master, lead times, historical demand, and inventory records. Regularly audit and update data to maintain planning accuracy.

Foster Cross-Functional Collaboration

Align sales, inventory, procurement, and production teams around DRP outputs. Regular review meetings help interpret DRP recommendations, adjust forecasts, and handle exceptions collaboratively.

Leverage Rolling Plans and Continuous Improvement

Run DRP on a frequent schedule (daily or weekly) to capture changing demand signals. Monitor DRP performance metrics—forecast accuracy, fill rates, inventory turns—and refine parameters like safety stock and order multiples over time.

Integrate with Other Supply Chain Processes

Combine DRP with Sales and Operations Planning (S&OP), Material Requirements Planning (MRP), and advanced planning/scheduling (APS) systems to achieve end-to-end supply chain synchronization.

Acumatica Distribution Requirements Planning Functionality

Overview of Acumatica DRP Features

Acumatica’s cloud-based Distribution Management suite includes a robust DRP module that:

• Uses forecasted and actual sales data to generate time-phased replenishment plans across warehouses.
• Supports kit assemblies, purchase orders, and warehouse transfers, ensuring all component and finished-goods requirements are addressed.
• Offers flexible replenishment rules—min/max order quantities, lot sizing, reorder points, and safety stock—to tailor DRP to each item or warehouse.
• Provides detailed planning screens showing all activity, balances, and recommendations, enabling planners to review, accept, or modify suggested orders in real time.

Key Benefits of Acumatica DRP

• Holistic Inventory Optimization: Consolidate demand across multiple sites and warehouse locations to reduce overall inventory while improving service levels.
• Enhanced Collaboration: Shared DRP plans ensure sales, warehouse, and procurement teams work from the same data, reducing miscommunications and over-ordering.
• Real-Time Visibility: Cloud-based dashboards and alerts allow managers to spot potential shortages, lead-time issues, or unplanned demand spikes immediately.
• Scalability and Agility: Whether you have two warehouses or twenty distribution centers, Acumatica DRP scales seamlessly without added IT infrastructure.

Integration with Distribution Management

Acumatica’s DRP module is part of a fully integrated distribution suite, connecting seamlessly with inventory, purchasing, sales order management, and warehouse management. This unified design eliminates data silos, automates transaction flows, and provides end-to-end traceability from supplier to customer.

What is Distribution Requirements Planning: A Guide for Distributors

Distribution Requirements Planning is an essential tool for modern distributors seeking to balance inventory investment with service performance. By leveraging time-phased forecasts, master data accuracy, and advanced planning logic, DRP helps distributors avoid stockouts, reduce excess inventory, and make more informed supply chain decisions. Acumatica’s cloud-based DRP functionality extends these principles with flexible replenishment rules, real-time visibility, and seamless integration across distribution operations, empowering businesses to respond swiftly to market changes.

Implementing DRP successfully requires clean data, cross-functional collaboration, and a commitment to continuous improvement. When executed well, DRP becomes the cornerstone of a responsive, cost-efficient distribution network—one where customers consistently find the right products, in the right place, at the right time.

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FAQs: What is Distribution Requirements Planning?

What is Distribution Requirements Planning (DRP)?

DRP is a systematic, time-phased method for planning inventory replenishment across distribution centers and warehouses to satisfy forecasted and actual customer demand while minimizing stockouts and overstock situations.

How does DRP differ from Material Requirements Planning (MRP)?

While MRP focuses on planning components and raw materials for manufacturing orders, DRP applies similar explosion logic to finished-goods distribution, planning transfers and purchase orders to multiple distribution echelons based on demand signals.

What are the key benefits of implementing DRP?

Key benefits include optimized inventory levels, reduced carrying and ordering costs, improved service levels through fewer stockouts, enhanced supply chain visibility, and better cross-functional collaboration.

What data is required for effective DRP?

Effective DRP relies on accurate demand forecasts, lead time definitions, safety stock parameters, item master data, warehouse locations, and historical sales records.

Can DRP handle multi-warehouse and multi-site distribution networks?

Yes, DRP is designed to manage complex, multi-echelon networks, automatically generating transfer orders and purchase requisitions across all warehouse and distribution centers in the network.

How does Acumatica support Distribution Requirements Planning?

Acumatica’s DRP module provides time-phased inventory planning screens, flexible replenishment rules, kit assembly planning, and real-time dashboards—all integrated with inventory, purchasing, and warehouse management for end-to-end visibility and control.