CLTD practice question 19 of 25

Which of the following inventory ordering techniques would a company's corporate warehouse utilize if it is interested in meeting both the quantity and timing requirements of demand from its regional warehouses?

Full set: 150 questions
Answer options
A: Distribution requirements planning (DRP) Correct answer
B: Fixed order quantity/variable cycle
C: Periodic review
D: Kanban
Correct Answer:
A. Distribution requirements planning (DRP)
Explanation

Distribution requirements planning (DRP) is the appropriate technique for this scenario. DRP is a time-phased planning method that determines the need to replenish inventory at branch warehouses and distribution centers. It calculates the quantity and timing of requirements from downstream locations (regional warehouses) and aggregates them to create a time-phased demand schedule for the upstream supplying location (the corporate warehouse). This directly addresses the need to meet both the quantity and timing requirements of dependent demand within a distribution network.

Why Incorrect

B. Fixed order quantity is a single-location inventory policy that does not coordinate demand and supply across a multi-echelon network.
C. Periodic review is another single-location inventory policy that triggers orders based on a fixed time interval, not the coordinated needs of a distribution network.
D. Kanban is a pull-based execution system that signals a need for replenishment when stock is consumed. It is not a forward-looking planning technique like DRP.

References

1. APICS Dictionary, 16th Edition. Definition of "Distribution Requirements Planning (DRP)": "The function of determining the need to replenish inventory at branch warehouses. A time-phased order point approach..."

2. Vollmann, T. E., Berry, W. L., Whybark, D. C., & Jacobs, F. R. (2005). Manufacturing Planning and Control for Supply Chain Management (5th ed.). McGraw-Hill. Chapter 9, "Distribution Requirements Planning," explains how DRP links the entire logistics system by planning inventory requirements throughout the distribution network.

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