No, you do not need Advanced Inventory Management. Advanced Inventory Management and Demand Planning are essentially mutually exclusive on a per-item basis. Advanced Inventory Management is for automatically replenishing stock based on reorder points, safety stock, etc. as opposed to the time-phased method of Demand Planning.

I’m a little bit confused about your example.  You’re saying you have a location C that makes widgets (let’s call it a “factory”) and then Locations A and B receive their supply from this factory (let’s call these “retail stores”).  If the retail stores A and B are the ultimate location of all the finished goods, why would you ship items back to factory C?  Wouldn’t you just ship the excess from A or B between them?  My understanding of DRP (although I don’t currently have an account with this enabled) is that it has to be in a hierarchical setup, i.e. you can’t generate transfers  both from C to A and from A to C, which makes sense because it would create a logical loop.