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DRP: one central warehouse, many branches

DRP decides how much the central warehouse should send to each branch and when, so every branch has stock without each one buying on its own.

2 d1 d1 d1 d1,522 units on the waySupplier8 weeks awayCD Vía Tocumen73 unitsSafety stockDavid70/wk20 unitsSafety stockSantiago42/wk43 unitsSafety stockColón56/wk7 unitsSafety stockChorrera35/wk19 unitsSafety stock

Plan made on Monday of week 1. NexusChain re-plans every Monday with the real stock.

W1W2W3W4W5W6W7W8W9W10W11W12
Send to David707070707070707070707070
Send to Santiago424242424242424242424242
Send to Colón565656565656565656565656
Send to Chorrera353535353535353535353535
CD must send (total)203203203203203203203203203203203203
CD buys from supplier203203203203203203203203203203203203
StockSafety stockTruck with a transfer or purchaseBranch out of stock
Week 12 · day 7
Purchase orders to supplier
12
Transfers CD → branch
74
Branch-days out of stock
2
Sales lost (units)
6
Average network stock
476 units
Safety stock: CD / on its own
272 / 301

When you have branches, each one needs the right parts on its shelf. If every branch buys from the supplier on its own, you pay four freights, place four purchase orders and keep four piles of safety stock.

With DRP (Distribution Requirements Planning), the branches ask the central warehouse instead. Each branch plans its own needs — forecast, stock, safety stock and the truck time from the CD. The CD adds all those transfers up, and that total is what it buys from the supplier.

The map plays twelve weeks. Watch the trucks leave the CD so they arrive just when each branch needs them, the branch gauges go down with daily sales, and the CD refill when the supplier's truck arrives. A red frame means a branch ran out and lost sales.

How DRP plans, every Monday

  1. 1Each branch takes its forecast, its stock and its safety stock, and works out week by week when it will need a truck — exactly like an MRP record.
  2. 2Each planned arrival moves back by the truck time from the CD: that is when the transfer must leave.
  3. 3The CD adds up the transfers of all branches, week by week. That sum is the CD's demand — not the customers' sales.
  4. 4The CD nets that demand against its own stock and places purchase orders one supplier lead time earlier (this is MRP again, one level up).

Why one central stock needs less safety stock

Safety stock protects against demand swings during the supplier lead time. When one branch sells more and another less, the swings partly cancel out at the CD. So the CD needs less protection than the four branches added together — the square-root law. The branches still keep a small buffer for the few days until the next truck.

Each branch on its own301
David
Santiago
Colón
Chorrera
Central warehouse + branch buffers272
CD
Branch buffers

The CD's pooled stock is 48% smaller than the four branches' stocks added together. Counting the branch buffers, the network needs 10% less safety stock.

z · √(σ₁² + σ₂² + σ₃² + σ₄²) · √L < z · (σ₁ + σ₂ + σ₃ + σ₄) · √L
σ = weekly swing of each branch, L = weeks to cover (supplier lead time + one week), z = 1.65 for about 95% service.

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What to remember

  • DRP plans each branch like an MRP record: forecast, stock, safety stock and truck time give the transfers to send and when.
  • The CD's demand is the sum of its branches' transfers, not its own customers' sales.
  • That sum drives the CD's purchases from the supplier — DRP feeds MRP and procurement.
  • One pooled stock at the CD needs less safety stock than every branch buying on its own, and the gain grows with the supplier lead time.
  • Keep truck times up to date: DRP uses them to decide when each transfer leaves.