Net Requirements — Manufacturing Glossary

Net requirements are the actual quantity of a component or material that must be ordered or produced after subtracting available inventory and scheduled receipts from gross requirements. The netting calculation is the core step in MRP that translates total demand into actionable orders.

At User Solutions we describe net requirements as the "bottom line" of MRP — the number that tells purchasing what to buy and production what to make.

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How Net Requirements Are Calculated

The netting formula is straightforward:

Net Requirements = Gross Requirements - On-Hand Inventory - Scheduled Receipts + Safety Stock

MRP performs this calculation for every item in every time bucket across the planning horizon.

Step by Step

1. Start with gross requirements — total demand from BOM explosion and any independent demand.
2. Subtract on-hand inventory — what is physically in stock and available.
3. Subtract scheduled receipts — open purchase orders and work orders due to arrive before the requirement date.
4. Add safety stock requirement — if the item has a safety stock level, MRP ensures inventory does not drop below it.
5. If net requirements are positive, MRP generates a planned order using the item's lot-sizing rule.
6. If net requirements are zero or negative, no order is needed for that period.

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Net Requirements Example

Component BRKT-400 (steel bracket) has the following data for Weeks 6 through 9:

Week 6: No demand. On-hand stays at 90.

Week 7: Gross = 120. Available = 90 (on-hand) + 50 (scheduled receipt) = 140. Net = 120 - 140 = -20. No order needed. Ending inventory = 20.

Week 8: Gross = 80. Available = 20 (carried forward). Net = 80 - 20 = 60. MRP generates a planned order.

Week 9: Gross = 150. Available = 0 (previous period's order covers only Week 8). Net = 150. MRP generates another planned order.

If the lot-sizing rule is lot-for-lot, MRP plans orders for exactly 60 and 150. If EOQ is 200, MRP orders 200 in Week 8, which covers Week 8's 60 and leaves 140 for Week 9, reducing Week 9's net to just 10 (requiring no additional order or a top-up order depending on rounding).

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Why Net Requirements Matter for Scheduling

They drive every order in the system. Every purchase order and work order traces back to a net requirement. If the netting is wrong — due to inaccurate inventory records or missing scheduled receipts — orders will be wrong too.

Inventory accuracy is critical. The netting formula's output is only as good as its inputs. If on-hand inventory shows 200 units but only 150 are physically present (due to unrecorded scrap, damage, or theft), MRP will understate net requirements by 50 units, leading to a shortage.

They connect to scheduling timing. Net requirements are time-phased — they specify not just how much but when. Scheduling software like Resource Manager DB uses these dates to determine when production must start, working backward from the requirement date by the manufacturing lead time.

They expose over-ordering. Negative net requirements (excess stock) are just as important as positive ones. MRP flags periods where incoming orders exceed demand, prompting planners to cancel or defer orders before surplus inventory arrives.

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Related Terms

• Gross Requirements — Total demand before netting, the starting point of the netting calculation.
• Scheduled Receipt — Open orders expected to arrive, subtracted from gross requirements during netting.
• Planned Order — The order MRP generates when net requirements are positive.

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FAQ

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This term is part of the Manufacturing Glossary. For a deep dive into material planning, see our MRP Guide.