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The Fundamentals of DRP (Part 1 of 2)

What does Demand Replenishment Planning (DRP) mean?

DRP, a new feature of Epicor Prophet 21, is intended for items with long lead times. DRP will take your current inventory forecast, using UPTO, EOQ, Min/Max or OP/OQ, and forecast out one year into the future. For example, let’s pick an item with a lead time of 30 days and over. By creating a forward year, in this case 2013, the DRP model now will generate forecasts over the forward year to determine future customer requirements. (However, DRP does not work with erratic-patterned items.)

Why is DRP useful to distributors?
DRP will follow your inventory curve. In other words, let’s say the item we are forecasting has a 90-day lead time. If we create a purchase order on October 20, the material will not be due in until January 20, 2013. We don’t need to purchase based on October’s forecast; we need to purchase based on what we will need in January. Now, if the current forecast is 200 pieces in October, what will the forecast need to be for this item in January? Let’s assume some seasonality for this item: in January, the demand drops off to 100 pieces; therefore, the DRP model will suggest the purchase of enough material to cover January’s 100 pieces, based on the item’s replenishment method.

One other bonus to DRP is that it will alert you to potential shortfalls. In the above example, let’s say before the receipt in January, your net stock will be down to zero or below. DRP gives the buyer a head’s up to possibly purchase the shortfall before the January purchase receipt. If the shortfall is not purchased, a sure stock out will occur.

In our next blog, we will discuss Future Stock Analysis Queries, Item Future Forecast Fast Edits, and other DRP functions available for specific inventory forecast methods.

Posted by Neil VanWalbeck, Senior Professional Services Consultant at Epicor Software

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