The net requirements calculation is the heart of MRP (material requirements planning), the method that turns the master production schedule into concrete purchase and manufacturing orders. Its principle: start from what you need (the gross requirement), subtract what you already have or have on order, and buy or produce only the difference. This prevents both ordering what is already in stock and missing what is not.
The net requirements calculation: from gross to net
The net requirements calculation follows a logical subtraction. You start from the gross requirement: the total quantity needed, which comes from the master production schedule, exploded through the bill of materials. You subtract on-hand stock and quantities already ordered but not yet received (scheduled receipts). If policy requires, you add the safety stock to be maintained. In short: net requirement = gross requirement − on-hand stock − scheduled receipts + safety stock. The result is the real quantity to buy or manufacture. This net requirement is then offset in time by the lead time, so the order is released early enough to arrive at the right moment.
MRP: executing the master schedule
MRP does not decide demand: it executes a decision already made. The demand forecast, whose methods our article demand forecasting explains, feeds S&OP and the master production schedule; MRP turns that schedule into precise actions. It is a clear illustration of the Two-Layer Model: the decision (what do we want to produce and sell?) belongs to an upper layer, and the net requirements calculation belongs to the execution layer that makes it operational, item by item.
When does an SME need it?
The net requirements calculation becomes useful as soon as an SME assembles or manufactures products from several components with different lead times. As long as there are only a handful of items, manual tracking is enough; but once bills of materials multiply, calculating requirements “by hand” becomes a source of errors and stockouts. MRP structures this calculation and makes it reliable and repeatable.
The common mistake
The classic mistake is trusting MRP without first making its input data reliable: an inaccurate system stock, an outdated bill of materials, or an incorrectly entered lead time produces a wrong net requirement. MRP does not correct bad data; it propagates it, sometimes amplifying it. The other trap is ignoring lead-time variability, which leads to releasing orders too late. The quality of the net requirements calculation depends entirely on the quality of the data feeding it.
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Frequently asked questions
What is the net requirements calculation?
It is the heart of MRP: start from the gross requirement, subtract on-hand stock and scheduled receipts, and buy or produce only the difference.
What is the difference between gross and net requirements?
The gross requirement is the total quantity needed; the net requirement is what remains to be sourced once on-hand stock and scheduled receipts are subtracted.
Does an SME need MRP?
Yes, as soon as it manufactures or assembles products from several components with different lead times, where manual calculation becomes a source of errors.