MRP and DRP: Similarities and Differences

If you work in any kind of position related to industrial production or distribution, you are surely involved with or have at least already heard about MRP and DRP. Yet it is not always clear what is similar between these methods and what is different. In this article, we will provide details on their roles and outline the parallels between their characteristics and differences.

Efficiently moving and consuming items

Both methods have similar goals: having the right item, in the right amount and when it is needed, in order to make the production chain more efficient. MRP is focused on producing and replacing items, while DRP aims to distribute and deliver them.

MRP

This system emerged in 1960 as a way to improve production planning for finished goods, semi-finished goods and procurement of inputs. This method allowed this process to be automated, leading to faster responses to changes in demand.

Based on the expected amount of need for a given product and the parts necessary to manufacture it, MRP checks current inventories for each part and generates manufacture orders and/or suggests purchase orders for inputs that are at insufficient stock levels for the demand expected.

Bill of Materials (BOM)

The product structure or Bill of Materials, which indicates exactly what is needed to manufacture each item, is a significant component in an MRP. Software like SoftExpert PDM makes the task of creating and maintaining product structures easy and practical.

For example, imagine that item “A” is made of 5 units of component “B,” 10 units of component “C” and 8 units of component “D.” The BOM scheme for product “A” would be as follows:

Simulated calculation

By performing a simplified simulation of the MRP process for item “A” for a demand of 80 units and assuming that there is no available inventory for this product, the system will find how many of each component is needed to make 80 units and will cross-check this number against your availability.

Once calculations are finalized, the system will find that there is sufficient inventory for components “B” and “D,” but at least 700 units of item “C” will need to be purchased to meet the demand of product “A.”

What is DRP?

This is a process that attempts to efficiently distribute items. This includes having the right items, in the right amoutn and in the right place over time.

When building a DRP plan, a central distribution center checks the amount that should be sent to each warehouse based on the expected demand for that area and existing inventories. Based on this information, a determination is made of how much needs to be sent to that warehouse.

Simulated calculation

One simplified example would be to look at a set of products “F,” “G” and “H,” which are distributed to three warehouses, “North,” “S. Luis” and Boa Vista,” in the necessary amounts shown in the “Demand” column, with current inventories registered in the “Avaiable” column. Based on this, the system will calculate the amount of each product to send to each warehouse.

Depending on inventory levels and drops in demand, items can be reallocated between warehouses through so-called transfers. And after this is done, if there is still not sufficient inventory, this will serve as an input for the MRP, indicating the need to produce and/or purchase more product.

Similarities between MRP and DRP

We should keep in mind that the MRP focuses on product inventories in one location, while the role of the DRP is to balance inventory among various company warehouses. At any rate, both systems need to operate in an integrated way in order to optimize operations.

In this respect, the better the flow of information, from purchase of raw materials from suppliers to their delivery at the point of sale for the end consumer, the more efficient the supply chain will be. To help in this challenge, count on SoftExpert Workflow and Process tools, which are natively integrated with each other and with the other chief management packages available on the market, with the capability to provide top-quality MRP and DRP tools.

Click the links below to learn more about these tools:

 

 

 

    Laurides Dozol

    Author

    Laurides Dozol

    MBA in Enterprise Management from FGV. Business and market analyst at SoftExpert, a software provider for enterprise-wide business processes automation, improvement, compliance management and corporate governance.

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