By Carl Taubel

As warehouses get more automated, distributors are turning to distribution resource planning (DRP) systems to help them manage their purchasing process. DRP systems consist of four major components: demand forecasting, inventory balancing, order calculation, and the user interface. Depending on your company's unique business characteristics, one of these components will be much more important than the rest. The key to selecting the right DRP system is to determine which area is critical for your company, and then find the package that excels in it.

The most important step when selecting a DRP system is to analyze your company, market, and products to determine what DRP component is the most important to you. Your first reaction may be that all of the DRP components are important. This may be true, but in every case, one component has more impact on your bottom line than the others. The easiest way to evaluate your needs is by answering some questions about the nature of your business, and the characteristics of your inventory:

• Is your demand highly seasonal in nature? Are your demand patterns repeated year after year?
• Do your products have a short selling life? (fashionable, single season products)
• Is the primary cause of excess inventory due to poor demand forecasts?
• Is the primary cause of excess inventory due to supplier imposed purchasing minimums or other purchasing policies?
• Is the primary cause of excess inventory due to your stocking and transshipment policies?
• Are your lead times erratic and unpredictable? Are your lead times under two weeks and fairly predictable?
• Is your primary role a lead time buffer between your customers and the product manufacturers? Is your primary role to purchase in bulk and sell in small quantities?
• Is the cost of transshipping products high relative to their profit margin and carrying costs?
• Is your primary role placing orders for your customers, holding and delivering their inventory?
• Do you stock inventory in a hierarchical warehouse structure (regional, local, retail), or is your distribution network flat?
• Do you move large amounts of inventory from regional warehouses to local warehouses?

This is only a small set of the questions you need to ask when evaluating your company. The objective is to identify what is most important to your company -- demand forecasting, inventory balancing, or order calculation. For instance, if your answers indicate that your profits hinge on your ability to predict product demand, demand forecasting is your area of concern. If your primary role is holding and managing inventory for others, then inventory balancing may be your primary concern. If your excess inventory is caused by purchasing policies, order calculation may be important to you. These and other questions are meant to help determine what drives your company, and to help you focus on your needs and requirements in the most important area.

Purchased software always forces you to make tradeoffs between what you would like to have and what you can get. When selecting a DRP system, do not compromise on what is most important to your company. The DRP system that best meets your needs in your primary area of concern is probably the best system for you.

All third-party software systems are designed to solve general problems. Each will excel in some areas, and be wanting in others. The key to picking the right DRP system is knowing what is most important to your company and finding the package that excels in your primary area of concern.

Copyright © 2020 by APICS — The Educational Society for Resource Management. All rights reserved.

Web Site © Copyright 2020 by Lionheart Publishing, Inc.
All rights reserved.


Lionheart Publishing, Inc.
2555 Cumberland Parkway, Suite 299, Atlanta, GA 30339 USA
Phone: +44 23 8110 3411 | br> E-mail:
Web: www.lionheartpub.com


Web Design by Premier Web Designs
E-mail: [email protected]