DRP vs MRP: What’s the Difference?
If you’ve used Material Requirements Planning (MRP), DRP might feel familiar. MRP helps manufacturers plan the raw materials and components needed to make products. Distribution Requirements Planning does the same kind of planning, but for finished goods.
Here’s the difference:
- MRP = planning what to make
- DRP = planning how to move what’s already made
The two systems are often connected. DRP figures out what needs to be shipped to meet customer demand. Then MRP uses that information to ensure enough goods are being produced to keep the supply chain running smoothly.
How Distribution Requirements Planning Works
A Distribution Requirements Planning system pulls together several key pieces of data:
- Demand forecasts from customers or sales teams
- On-hand inventory at each location
- Purchase orders already in progress
- Transportation and delivery lead times
- Minimum and maximum stock levels
It takes all of that, runs the numbers, and produces a time-phased plan: what to ship, how much, and when.
A Real-World Example: DRP in Action
Say you run a business that sells air purifiers. You have a central warehouse and three distribution centers. You expect demand to rise in the next two months due to wildfire season.
Here’s the forecast:
- DC1: 1,000 units
- DC2: 1,500 units
- DC3: 800 units
Your central warehouse currently holds 2,000 units. Each DC needs to maintain 100 units in reserve. Shipping takes one week; supplier restocking takes four weeks.
A DRP system will help you decide:
- When to ship to each DC to prevent stockouts
- How much extra stock to order from suppliers today
- How to balance stock across DCs so no location ends up over- or under-supplied
All of this happens before there’s a problem. That’s the point of Distribution Requirements Planning—it’s proactive, not reactive.
Why Distribution Requirements Planning Matters
Poor distribution planning usually shows up in two ways: either a customer places an order you can’t fulfill, or you’re stuck with excess stock eating up space and cash.
DRP helps you avoid both. It gives your team visibility into what’s needed, where it’s needed, and when to act.
It also supports:
- Better service levels – Customers get products on time
- Lower operating costs – You avoid rush orders and shipping inefficiencies
- Smarter purchasing – You buy based on real demand, not assumptions
- Stronger coordination – Sales, operations, and warehouse teams stay aligned
ERP with DRP Capabilities: The Best of Both Worlds
Many businesses now rely on ERP systems that include Distribution Requirements Planning features as part of their planning toolkit. When DRP is built into your ERP, you get a single source of truth across purchasing, inventory, sales, and distribution.
That means fewer delays, better accuracy, and less manual work. Instead of jumping between spreadsheets, your team can manage everything in one place. Sales forecasts instantly shape distribution schedules. Warehouse data updates inventory in real time. Purchase orders can be auto-generated based on what your DRP engine calculates.
This setup becomes especially valuable as your business grows. More products, locations, or sales channels add complexity. Manual processes can’t keep up. ERP systems like NetSuite, SAP, and Microsoft Dynamics with built-in DRP functions help you scale while staying in control.
Core Parts of a DRP System
- Time-Based Planning
DRP builds plans over weeks or months. It helps you look ahead, not just react to today. - Bill of Distribution (BoD)
This maps out your product flow from suppliers to warehouses to customers. DRP needs this for accurate planning. - Inventory Status Records
Knowing how much stock you have and where it is helps avoid overordering or running out. - Demand Forecasts
Even basic forecasts give DRP a foundation to work with. They drive replenishment schedules. - Safety Stock
No forecast is perfect. Safety stock acts as a buffer against demand spikes or delays.
Use Cases: Where DRP Delivers Value
- Retail
Multi-store chains use DRP to stay ready for peak seasons and avoid tying up stock in slow locations. - Manufacturing
DRP tells production teams what to make and when, based on real downstream demand, not guesses. - Consumer Goods
DRP helps move the right quantities to the right regions, cutting delivery times and improving fill rates. - E-commerce
DRP enables smarter stock placement across fulfillment centers, lowering costs and speeding up delivery.
Setting Up a DRP System
You don’t just flip a switch to set up Distribution Requirements Planning. You need:
- Accurate Data – Your inventory and lead time info must be reliable
- Forecasting Tools – Even a rolling average is better than nothing
- Software – Most teams use ERP or specialized planning tools for DRP
- Process Discipline – DRP gives you a plan; your team needs to follow it
Once DRP is live, it runs in cycles. New data comes in weekly or monthly. The system recalculates, then planners review and adjust before approving.
DRP vs DRP II
Sometimes you’ll see DRP II mentioned. That’s just a broader version of Distribution Requirements Planning. DRP focuses on product flow. DRP II adds capacity and financial planning.
So instead of only asking:
- What do I need to ship?
You’re also asking:
- Do I have the staff and equipment to do it?
- Can I afford it?
- What happens if demand spikes?
This deeper planning is useful for large operations or those managing tight margins and limited resources.
Common DRP Mistakes to Avoid
Even good Distribution Requirements Planning systems can fail if:
- Data is inaccurate – Garbage in, garbage out
- Teams override too often – Trust the system unless there’s a clear reason
- Nobody’s trained – If people don’t get it, they won’t use it
- Forecasts are poor – DRP is powerful, but it’s not psychic
Final Thoughts
Distribution Requirements Planning helps businesses plan inventory and logistics before problems show up. It brings visibility and structure to your supply chain.
When DRP is part of your ERP, it becomes more powerful. You can act on real-time data instead of guesswork.
If you manage multiple locations, shifting demand, or rising shipping costs, Distribution Requirements Planning is worth serious consideration. It won’t fix everything, but it’ll give you the control to make smarter moves and avoid costly surprises.
Frequently Asked Questions
What is Distribution Requirements Planning (DRP)?
Distribution Requirements Planning is a method used to plan the movement and replenishment of finished goods across your distribution network. It ensures the right products are in the right place at the right time, based on forecasted demand, inventory levels, lead times, and safety stock.
How is DRP different from MRP?
MRP (Material Requirements Planning) is focused on planning raw materials and components for manufacturing. DRP, on the other hand, deals with the distribution of finished goods. Think of MRP as production planning and DRP as distribution planning. Both systems often work together.
Why is DRP important in supply chain management?
DRP helps avoid stockouts and excess inventory. It gives businesses a clear plan for what to ship, when, and how much, based on real-time data. This improves service levels, reduces costs, and keeps operations running smoothly.
What kind of data does a DRP system use?
A DRP system uses demand forecasts, on-hand inventory levels, purchase orders in progress, lead times for transportation and delivery, and safety stock requirements. It compiles this data to create time-based shipping and replenishment plans.
Can DRP be used with ERP systems?
Yes. Most modern ERP systems, like NetSuite, SAP, and Microsoft Dynamics, include built-in DRP functionality. This integration allows for more accurate and automated planning across purchasing, inventory, and distribution.
What industries benefit most from Distribution Requirements Planning?
DRP is valuable in retail, manufacturing, consumer goods, and e-commerce—anywhere inventory is stored in multiple locations and demand varies by region or season.
What’s the difference between DRP and DRP II?
DRP focuses on the movement of goods. DRP II goes further by including resource planning and financial constraints. DRP II answers not just “what to ship,” but also “do we have the budget and capacity to do it?”
What are the common mistakes to avoid with DRP?
Bad data, poor demand forecasting, lack of training, and frequent manual overrides are common issues. These weaken the system and can lead to incorrect inventory decisions.
How often should DRP plans be updated?
Most DRP systems run in weekly or monthly cycles. As new sales, inventory, and supplier data come in, the plan is recalculated to keep things aligned with current conditions.
Do small businesses need DRP?
If you’re managing inventory across multiple locations or channels, even a small business can benefit from DRP. It helps reduce guesswork, streamline inventory flow, and improve planning accuracy.
