What is Distribution Requirements Planning (DRP)? Definition & Manufacturing Examples

What is Distribution Requirements Planning?

Distribution requirements planning (DRP) is a systematic method for determining when and how much inventory to ship to each location in a multi-site distribution network. It applies the same time-phased planning logic used in MRP — but instead of planning material needs for manufacturing, DRP plans inventory replenishment across warehouses, distribution centers, and regional stocking locations. DRP looks at demand at each location, considers on-hand inventory and in-transit shipments, and works backward through transit lead times to schedule replenishment shipments from the supply source.

How Distribution Requirements Planning Works

DRP begins at the demand level — the individual distribution centers, warehouses, or branch locations where customer orders are fulfilled. At each location, the system calculates future inventory needs based on the demand forecast, current on-hand inventory, in-transit quantities, safety stock requirements, and replenishment lead time.

When projected on-hand inventory at a location drops below its reorder point, DRP generates a planned shipment from the supplying location — which might be a regional distribution center, a central warehouse, or the manufacturing plant. These planned shipments cascade up through the distribution network, with downstream location needs becoming the demand signal for the next upstream location.

At the top of the network sits the manufacturing plant. The aggregate of all planned shipments from the plant's warehouse becomes the demand input to the master production schedule. This is how DRP connects distribution planning to production planning — ensuring that manufacturing knows what to produce and when to produce it based on actual replenishment needs across the entire network.

DRP also supports shipment consolidation and transportation planning. Rather than shipping small quantities frequently, DRP can aggregate planned shipments to fill truckloads, optimize delivery routes, and schedule shipments to arrive during receiving windows at each location.

Distribution Requirements Planning Example

A manufacturer of electrical connectors supplies 4 regional distribution centers from a central plant warehouse. The Southeast DC stocks 800 SKUs with an average demand of 15,000 units per week and a replenishment transit time of 3 days. Safety stock is set at 1 week of demand.

DRP projects that the Southeast DC's inventory of a popular connector will drop below safety stock in 10 days. The system generates a planned shipment of 5,000 units to arrive by day 8, accounting for 3 days transit and 2 days shipping preparation. This shipment, along with planned shipments for the other 3 DCs, rolls up to the plant as demand requiring 18,000 connectors by week 2.

Without DRP, each DC manager ordered independently based on gut feel, creating lumpy demand at the plant — some weeks requiring 25,000 connectors and others only 8,000. DRP smooths the demand signal by time-phasing replenishments. Plant demand variability drops by 35 percent, enabling more stable production scheduling and lower safety stock at the plant.

Total network inventory decreases from $4.2 million to $3.4 million — a 19 percent reduction — while fill rates improve from 93 to 97 percent because inventory is positioned where and when it is needed.

Why Distribution Requirements Planning Matters for Scheduling

DRP provides the manufacturing plant with a time-phased demand schedule rather than surprise rush orders from distribution centers. This visibility allows production schedulers to plan ahead, level production, and avoid the costly cycle of idle periods followed by overtime surges.

Scheduling software like Resource Manager DB (RMDB) uses the demand generated by DRP as input to the master production schedule and detailed production scheduling. When DRP projects increased demand at distribution centers four weeks out, the scheduler can begin ramping production now — spreading the work across available capacity instead of cramming it into the final week.

The integration of DRP with production scheduling creates a pull-based planning chain: actual distribution needs drive production timing, which drives material procurement. This alignment reduces both inventory and stockouts across the entire supply chain.

Related Terms

• Material Requirements Planning — The manufacturing planning method whose logic DRP extends to the distribution network
• Supply Chain Management — The broader discipline that DRP supports through coordinated inventory planning
• Demand Planning — The forecasting process that provides the demand inputs DRP uses at each location

Frequently Asked Questions

Learn more in our complete manufacturing glossary or production scheduling guide.