Distribution requirements planning (DRP): a worked example
Two depots need the same product in different weeks. Work back through their stock and transfer dates to see what the central warehouse actually needs.
Distribution requirements planning (DRP) works out replenishment quantities and dates across a distribution network. It subtracts available stock and scheduled receipts from each location's demand, then works back through transfer times to the source.
North depot has enough stock for this week. South needs a delivery next week. The central warehouse has 100 pieces, which looks healthy until both depots' requests reach it.
Adding everyone's customer demand and ordering that total would miss the stock already in the network. Looking only at the central balance would miss where and when the pieces are needed.
Oracle's planning documentation describes that link: a receiving location's planned orders create requirements at its source, with transit lead times included.
DRP vs MRP: locations rather than components
The MRP example starts with display stands and works down their bill of materials to brackets, bases and bolts. DRP follows the same finished item through warehouses.
| Question | MRP | DRP |
|---|---|---|
| What connects the requirements? | The components needed to make an item | The locations supplying and receiving an item |
| What is offset in time? | Purchasing or production lead time | Replenishment and transfer lead time |
| What does a plan propose? | Dated component supply | Dated supply at each location and the corresponding source requirement |
They can connect. A distribution plan may tell a factory when finished goods are needed; the material plan then works out what production requires. Neither establishes that every truck, supplier or production slot is available.
DRP calculation example: net each depot's demand
Our fictional network handles one finished item in individual pieces. Central opens with 100, North with 40 and South with 30. Another 20 are already in transit to North, due at the start of week 2. Those 20 left before this horizon and are not still inside Central's 100.
| Customer demand due by week end | Week 1 | Week 2 | Week 3 | Week 4 |
|---|---|---|---|---|
| North | 20 | 30 | 40 | 20 |
| South | 20 | 20 | 30 | 30 |
Receipts arrive at the start of a week, before its demand. We propose exactly the missing quantity, with no safety stock or order multiple. A transfer released at the start of one week arrives at the next week's start.
North ends week 1 with 20. Its existing 20-piece receipt gives it 40 for week 2; after 30 of demand, ten remain. Week 3 needs 40, so North needs a new receipt of 30. That transfer must leave Central in week 2.
South has a different gap. Its opening 30 covers week 1's 20 and leaves ten. Week 2 needs another 20, so a ten-piece transfer must leave Central in week 1 to arrive in week 2.
Calculate central warehouse requirements and releases
Continuing the calculation gives these new transfer receipts:
| New receipt needed at depot | Week 1 | Week 2 | Week 3 | Week 4 |
|---|---|---|---|---|
| North | 0 | 0 | 30 | 20 |
| South | 0 | 10 | 30 | 30 |
| Corresponding dispatch from Central | 10 | 60 | 50 | 0 |
The final row is shifted one week earlier. Central's week-2 requirement is North's 30 plus South's 30, both needed at the depots in week 3.
Central ships ten in week 1 and 60 in week 2, leaving 30. Week 3 requires 50. It therefore needs a 20-piece receipt at the start of week 3. With the example's one-week external lead time, that supply needs release in week 2.
The depots' customer demand totals 210. Their new transfers total 120, and Central needs only 20 from outside this opening network. These are different levels of the same requirement, not quantities to add together.
Follow one late transfer without ordering it twice
The original plan below covers the stated quantities. Change the South transfer due in week 3 so it arrives in week 4. Its 30 pieces remain in transit; they don't disappear from the open supply record.
One item, three locations, four weeks
The source requirement comes from dated depot transfers
Opening stock is separate from the 20 pieces already in transit to North. Quantities below are pieces; the original plan orders exactly each shortage.
Scroll sideways for the full network and each four-week ledger.
South owed at end of week 30 piecesOn-time reference: 0
Network stock in transit at end of week 350 piecesOn-time reference: 50; late transfer adds 30
North depot
| Quantity in pieces | Week 1 | Week 2 | Week 3 | Week 4 |
|---|---|---|---|---|
| Customer demand | 20 | 30 | 40 | 20 |
| Existing receipt, already in transit | 0 | 20 | 0 | 0 |
| New transfer receipt | 0 | 0 | 30 | 20 |
| Dispatch from Central for North | 0 | 30 | 20 | 0 |
| Closing net stock | 20 | 10 | 0 | 0 |
South depot
| Quantity in pieces | Week 1 | Week 2 | Week 3 | Week 4 |
|---|---|---|---|---|
| Customer demand | 20 | 20 | 30 | 30 |
| Original planned transfer receipt | 0 | 10 | 30 | 30 |
| Receipt in selected scenario | 0 | 10 | 30 | 30 |
| Dispatch from Central for South | 10 | 30 | 30 | 0 |
| Closing net stock, on-time reference | 10 | 0 | 0 | 0 |
| Closing net stock, selected scenario | 10 | 0 | 0 | 0 |
Central warehouse
| Quantity in pieces | Week 1 | Week 2 | Week 3 | Week 4 |
|---|---|---|---|---|
| Dispatch requirement for both depots | 10 | 60 | 50 | 0 |
| External planned receipt | 0 | 0 | 20 | 0 |
| External supply release | 0 | 20 | 0 | 0 |
| Closing stock | 90 | 30 | 0 | 0 |
The stated requirements are covered by the original plan
The two depots receive the planned quantities. This assumes the external 20-piece supply and every transfer are available as planned.
Timing, netting and conservation
Receipts and dispatches occur at the start of each week. Depot demand is due by week end. For each location, planned receipt=max(0, requirement−prior stock−existing receipt). The new release is one week earlier. North's existing 20 were dispatched before week 1; they are excluded from Central's opening 100.
North customer demand totals 110 and South 100. New transfers total 120; the separate opening pipeline is 20. Central's 100 plus an external 20 covers the new 120. The delay changes one South receipt from W3 to W4 and leaves all original releases fixed. The tables replay that plan; they do not create recovery orders or reserve transport capacity. No safety stock, lots, losses or additional demand are included.
South then ends week 3 owing 30 pieces. Week 4 receives the delayed 30 and its normal 30, enough to clear the backlog and cover that week's demand. Its final balance matches the on-time case, but the week-3 delay still happened.
The inventory-position note explains why an outstanding transfer must remain visible. Creating another 30-piece order without dealing with the first can turn a temporary shortage into excess stock later.
Check the route before treating the plan as a promise
This calculation has not reserved transport capacity or confirmed the external supplier's 20 pieces. Check dispatch cutoffs, receiving calendars, release and inspection time, stock status and any minimum shipment quantities. The cross-docking example follows those checks through one warehouse loading window.
If Central cannot obtain the 20 for week 3, the plan needs a decision about the affected transfers. A neat depot receipt row cannot resolve a shortage at its source. Confirm supply, consider an approved alternative or revise the commitments with the people responsible for them.
Keep forecasts and customer orders from counting the same demand twice too. DRP needs an agreed demand input at each depot. The bullwhip example shows why replenishment orders can fluctuate more than the consumption underneath them.
Start with the depot's quantity and need date. Work back to the supplying location and dispatch date, then confirm whether that supply can be provided.
Sources and example notes
- Oracle JD Edwards. Distribution Requirements Planning. Finished-goods distribution planning.
- Oracle MRP User's Guide. Supply Chain Planning, especially supply/demand schedules and transit lead times. Local requirements feeding the source plan.
All quantities and dates are fictional. The replay keeps the original orders and changes one arrival. It leaves recovery planning to a separate decision. There are no losses, other demand, capacity limits or safety-stock requirements. The existing in-transit 20 and Central's opening 100 are counted separately.