Distribution Scheduling

A few leading process manufacturers are achieving new levels of operational flexibility and effectiveness through what is coming to be known as master distribution scheduling. Responding to heightened pressures from customers for customized service— and from top management for better asset utilization—operations management of these firms recognize that their traditional DRP approaches are inadequate. In particular, the disconnects between plans generated by those systems and the realities of production capacity and demand are requiring too much management atten­tion to reconcile—often, with suboptimal results.

Through innovative use of information technology, a few progres­sive firms are now implementing capabilities that set the new standard for integrated operations planning.

This paper describes the emergence of master distribution sched­uling, and the importance of its advances beyond DRP. With reference to the experiences of two Fortune 500 companies, it demonstrates the limitations of DRP and how they are being dealt with in different environments. Finally, it describes how some companies are achieving master distribution scheduling—and the benefits they are realizing as a result.

One of the key problems with the distribution resource planning (DRP) methods in wide use today stems from the fact that they were conceived before finite-capacity production scheduling was possible. By necessity, in formulating its plans, DRP made the simplistic assumption that available production capacity was infinite. Unfortunately, this was far from the truth for many companies. In companies with capacity-constrained environ­ments, DRP generated plans that often could not be executed, and that certainly did not represent the optimal use of manufacturing assets.

Those companies benefited greatly with the advent of new infor­mation technology capable of generating production schedules given capacity constraints; such tools optimize asset utilization by balancing the complex cost and service trade-offs involved. However, managers' attempts to use these production scheduling tools in tandem with DRP have led to major disconnects. The DRP plans still call for suboptimal (and sometimes impossible) quantities to be shipped from sourcing locations, and these plans have to be reconciled with the more sophisticated plans guiding production.

Even in companies where limited capacity is not an issue, better production scheduling is producing disconnects with DRP plans. Here, the problems are caused by DRP's rigid sourcing assign­ments (it assumes that a distribution facility's supply of a product must always be replenished by one, static source location) and by its inability to recognize different priorities of demand. Clearly, for a consumer goods manufacturer, certain major accounts merit more fanatical service attention than others, but DRP has acted as the great equalizer. Indeed, it is not even capable of recognizing that filling customer orders is more important than replenishing warehouse supplies.

These and other inadequacies are making it necessary for opera­tions managers to seek new approaches—some by exception-managing the DRP systems they have in place, and a few by replacing those systems with new, more robust distribution scheduling capabilities.

To be Continued

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