DISTRIBUTION REQUIREMENT PLANNING APPROACH BASED ON LIMITED
SUPPLY CAPACITY IN SUPPLY CHAIN
LIN LEI, WEN-BUANG LIU, SHOU-JU REN, WE1 WANG
The National CIMS Engineering Research Center
Tsinghua University, Beijing, P.R.China, 100084
Abstract
DisGbution requirement planning (DRP) can be
regarded. as the extension of manufacturing
requirement planning (MU)in the logical view.
DRF’, starting from customers’ requirements, is used
to solve distribution problems of material resources
according to time, quantity and location in the field
of circulation. It is a typical problem in the supply
chain management. Complexity caused by distributed
supply and demand relationships has a great impact
on making plan, and uncertainty of resources is one
of the most important factors which must be
considered seriously in the problem optimization.
T h s paper makes research on distribution
requirement planning under limited supply capacity,
and an optimum model is built. By the mathematical
deduction, the model is equivalent to the linear
program Then the punctuality distribution
requirement planning approach is proposed.
Keywords
Supply Chain, Distribution Requirement Planning,
Manufacturing Requirement Planning
1 Introduction
Distribution requirement planning (DW) can be
regarded as the extension of manufacturing
requirement planning (MRP)in the logical view. As a
typical research problem in the supply chain
management, distribution requirement planning is
used to solve distribution problems of materials
resources according to requirements of time, quantity
and place in the field of circulation. With the
development of global network economy, the pattern
of global economy has gone through profound
change, and all kinds of service trades are going to be
the leading trade in more and more countries. In
order to make manufacturing and distribution fields
adapted to the development of market, and satisfy
consumers’ requirements of selectivity,
individuation, diversification and rapid delivery,
distribution requirement planning problem is required
to deal with complexity resulting from distributed
supply and demand relationship well. One of the key
Q 2001 IEEE
0-7803-77-2/01/$10.00
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factors is the uncertainty of kinds of resources. This
paper discusses the distribution requirement planning
under some certain constraints, that is the distribution
requirement planning approach under limited supply
capacity.
2 Problem Description
Suppose that a supply chain network composed of
many warehouses provides 1 retailers with n kinds of
products in the plan time period [1,T]. 4: is the
quantity of retailer k purchasing product i , d: is
the delivery time, and A, is the delivery location,
k=1,2 ,...,Z,i=1,2 ,...,n.Since the prices of raw
material are different in different districts, which
leads to different production costs of identical
product in different plants. So the prices of identical
product are different in different warehouses. ffis
the unit price of product i supplied by warehouse j ,
b: (t) is the supply capacity of warehouse j at time
t , and B j is the location of warehouse j,
j = 1,2,...,rn, t = 1,2,...,T.
In general, the unit price of product and
transportation rate given by each warehouse are
different. In order to get the lower supply cost, real
supply tasks that supply center designates to each
warehouse are not balanceable to its relevant supply
capacity of each warehouse, which leads to the fact
that warehouses deliver the goods late or early to
retailers. Obviously, unpunctual delivery reduces the
service quality of supply chain system. On the other
hand, if a warehouse delivers the goods early to a
retailer, the inventory cost of the retailer will
increase; otherwise, if a warehouse delays to deliver,
it will pay the extra money for the retailer as penalty.
So one of the business objectives of supply center is
to make a punctual distribution requirement plan
based on limited supply capacity and purchasing
requirements of retailers, and to minimize supply .
costs of products including transportation cost,
penalty from late or early delivery, and production
cost etc.
 As a rule, the penalty from early or late delivery
is proportional to the supply unit price, and the
transportation rate is proportional to transportation
p
time. Suppose that a, is respectively the penalty
factor of early or late delivery per unit time, and
a < ; 3/1 is the transportation rate factor of
product i per unit time; the transportation capacity is
enough to all the products.
3 Model Building
From the delivery location A, of retailer k and
location Bj of warehouse j , we can easily
formulate the transportation time s@,which
describes the time of warehouse j supplying
products to retailerk.
Definition 1: define z:,( t ) as the purchase quantity
of product i of retailer k that supply center requires
warehouse j to supply at time t ,and p ; ( t ) as the
plan supply quantity of product i of warehouse j at
In the model SCo, the first item of the objective
function is the penalty cost of late delivery; the
second item is the penalty cost of early delivery; the
third item is the production cost; the fourth item is
the transportation cost of products. The constraint (3)
expresses the quantity of all the products ordered
from all the retailers are supplied by all the
warehouses; the constraint (4) states that the plan
supply quantity of each warehouse should satisfy its
relevant supply capacity constraint; the constraint ( 5 )
ensures that the s u m of purchase quantity that each
warehouse is required to finish meets the constraint
of the s u m of supply quantity.
4 Model Conversion and Algorithm
The objective function of model SCo is non-
continuous, so it is not solved with the general
mathematical program. Thus, such conversion is
made to the model SCo as follows:
Define xii( t )as the over-supply quantity of
,'.
product iof warehousejat time t , y;(t)as the
short-supply quantity of product i of warehouse j at
time t ,then

[EP::(7) - cc
time t . I f I
Definition 2: defme the function hi ( t ) as follows: x; ( 4 = 2
; (Ql'
r=1 r = l k=l

(1)
h: ( t )=
i"'
0
t=d/
t#d/

Correspondingly, the distributed multi-warehouse

(7)

f l
1

t
multi-retailer supply and demand problem can be
described with model SG,
v;(0 = [y ?=l k=l
4 j (z) -
5=1
P ; (z)l+

5=l
p ; (z) = cc
f l

r=1 k=l
2; (z) + x; ( t )- y ; ( t )

p ; ( t )= $ p ; ( z )
r=l
- 2p ; (z)
5=1
1
+
= C Z k ( t ) x; (t)- x; (t - 1) - y; (t)+ y; (t - 1)
k=l
(10)
T I T So, the model SCois equivalent to the model SC:
x x z k . ( t )Ix b f i ( t ) Model SC:
t=1 k=l

(5)
t =1
p ; ( t )2 0, z:, ( t )2 0
T
ccw;.;+ LYj5; (4 c(ff
n m

t=1 i=1 J=1

(t) +
I

k=l
+ YPU 1.6. @>I

(6) (11)
Vi = 1,...,n,j = /2 ,...,m,k= 52,...,1,t = /2 ,...,T. s.t.

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 _ - -
As can be seen, ( x, y , z ) meets constraints of
- - -
model SC. If ( x , ~ , z )is substituted into
F(x, y , Z ) ,the following formula is obtained.
F(x,y,z) = F ( x ' , y ' , z ' ) - ( a + P ) f f y j ( t ) IF(x',y',z'

ccz;(t)
T

1=1
I

k=l
T
ICbi.(t)
I =I
(22)
Obviously, that is inconsistent with the fact that
( x*,y * ,Z* ) is the optimal solution of model SC. So
(14)
I we can conclude X* (t)y*( t )= 0 if ( x* ,y * ,z*) is
C Z & ( t ) x;+ ( t )- x; (t - 1) - y i ( t )+ y j (t - 1) 2 0
the optimal solution of model SC.
k=l

(1 5 ) Theorem: if x,y,z is the optimal solution of

z b ( t ) 2 O,x;.(t) 2 o,y;(t) 2 0 model SC, and the following formula exists,

(16)
Although the number of variables of model SC is
p ; ( t )= cI

k=1
z; ( t )+ x; ( t )- x; ( t - 1) - y; (t)+ y ; (t - 1)

larger than that of model SG, model SC can be (23)

solved with the general linear programming software then p is the optimal solution of model SCo,
since its objective function is linear. Below we give Proof Since x,y,z is the optimal solution of
the proof that model SC is equivalent to model SCo. model SC, when we compare the constraints of
Lemma: if x* ,y*,Z* is the optimal solution of model SC with those of model SCo in the feasible
domain of SC, it is easily concluded that p is within
model SC, then X* (t)y*( t )= 0 .
the feasible domain of SCo
Proof: Suppose that ( x * , y * , z * ) is the optimal According to the formula (17), j, t , vi,
solution of model SC, to some g and k , there exist then
x; (w;' (k) 0.
To ensure the generality of the problem, suppose r=l r=l k-1

x; ( k ) > y ; ( k ),and =
t I
{C[Cz;(f)+ x ; ( t ) - x; (t - 1) - y ; (f) + y; (t - 1)]- cp; I 1
(t)}'

i
zrl krl <=I k=l

.,( t ) =
x; ( t ) - y; ( t ) .
x; ( t ) ,
where j = g , and
other
t =k +
= [x; ( t ) - x ; (0)- y ; ( t ) y ; (O)]' = [xj ( t )- y j (t)]'
(24)
(1 7) Based on the lemma stated early, the following
formula can be obtained

t=l f=l k=l

(25)
In a similar way, we can establish the following
formula:

t = l k=l t=l
(26)
Comparing the objective function of model SC
with that of model SCo, we can conclude that formula
( 2 ) is equivalent to formula (1 l), so p is the optimal
solution of model SCo,
Algorithm
Model SC is equivalent to a general linear
programming model by the above model conversion,

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and it can be solved with the general linear
programming software. The detailed procedures are Table 3 Computation Result (The minimized
shown as follows: obiective value is 1671.7)
Stepl: Build model SC according to the known
conditions such as ordering information of retailers
and supply capacity constraint of warehouses.
Step2: Call the general linear program, and
compute x* ,y*,z* and F ( x * ,y * , z*) .
Stepf: Based on formula (23), compute the plan 1 0 25 10 0 0
supply quantity of each product of all the warehouses 2 3 0 0 10 0
in every time period.
5 An Empirical Case
The algorithm mentioned above is implemented
with Visual C++ program, and run in a PC/586
computer. We have simulated various examples and
obtained satisfactory results. Below is a small-scale
example.
Suppose that a supply network consisting of two
warehouses provides two retailers with two kinds of
products in the plan period [1,5]. The unit price of 1 12 12 15 10 0
product and deliverability of each warehouse are 2 8 8 10 10 10
shown as Table 1. a ,/? are respectively penalty
factor of early or late delivery of a warehouse, and
j $0) 4(3) 44) 40
1 1 n in 0 0 0
a = 0.1, p = 0.5 . "/1, y2are respectively
transportation rate per unit time for each product, and
"/1 =1,y2 = 0 . 5 .
10
2 n n 5 n 0

j f; f,' ,b$) 40 q3) q4)

\ 1 10 5 12 12 15 12
2 8 6 8 8 10 10

j, qo Q)$9 b34) &5)

1 12 10 10 8 10 10
2 1 0 8 8 6 6 6 1 I 10 10 8 10 0
2 1 8 8 6 5 0
Table 2 shows the ordering quantity of each
retailer, delivery time and transportation time of Compare Table 3 with Table 1, we can conclude
products. that the punctuality distribution requirement planning
approach minimizes the sum of penalty costs of early
Table 2 Ordering Information and Transportation or late delivery, transportation cost and production
Time cost in the precondition of the balance of supply and
demand capacity. In the mean time, the business goal
1 / 6 0 40 3 4 1 2 of supply chain - supplying punctually and earning
the maximal profits is achieved.
2 135 25 5 4 3 1
6 Conclusion
Table 3 shows the result of requirements plan
made by the above-stated punctuality distribution Supply chain is implemented under the mutual
requirement planning approach. action of materials flow, funds flow and information

1804
flow, and the value of materials is added after the
process of production, transportation and so on. Since
usable resources ability of each enterprise in supply
chain is limited, it becomes more and more important
to solve the supply and demand problem under the
limited resources ability in the supply chain. This
paper just researches on the distribution requirement
planning based on the limited supply ability. An
optimum model is built, and is converted into the
linear program by the mathematical deduction.
Finally, the punctuality distribution requirement
planning is introduced, and various cases show that it
can make the distribution requirement plan exactly
and rapidly, which lays foundation for the production
application, and provides managers with some
research direction of supply chain.

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